Notice - Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment Rules 2016 (2016-05-09)

Summary

This is a Bermuda Monetary Authority (BMA) consultation notice proposing amendments to the Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Rules. It sets out draft changes to the risk management and solvency disclosure schedules applicable to Class 4 and Class 3B insurers and invites industry comment before the rules are finalised.

• Schedule restructuring: Removes sub-paragraphs (c) ceded reinsurance particulars, (t) cash and cash equivalent counterparty analysis, (u) currency risk, and (v) concentration risk from Schedule V, and creates new standalone Schedules XVIII to XXI covering these same topics in more detail.
• Counterparty location disclosure: Adds a new sub-paragraph to the Schedule V instructions requiring Class 4 and Class 3B insurers to disclose the counterparty location for intra-group reinsurance and retrocession arrangements, to help identify cross-border activity and support dialogue with foreign regulators.
• Gross premiums disclosure: Amends the Schedule XVII instructions so Class 4 and Class 3B insurers must disclose gross (not just net) premiums written in relation to entities within the insurer's group structure.
• EBS valuation basis terminology: Introduces a defined term 'EBS Valuation basis' and replaces references to 'a consolidated' basis with 'an EBS Valuation' basis throughout multiple schedules (I, II, IIA, III, IIIA, V, VI, XI, XII).
• New detailed schedules: Sets out full templates and instructions for new Schedule XVIII (Particulars of Ceded Reinsurance), Schedule XIX (Cash and Cash Equivalent Counterparty Analysis), Schedule XX (Currency Risk), and Schedule XXI (Concentration Risk).
• Housekeeping items: Includes miscellaneous minor corrections and consequential amendments across the principal Rules.

The Authority proposed that all amendments become effective on 1 January 2017 and apply to financial years commencing on or after that date. As this is a consultation document, the rules described remain in draft form pending finalisation and are not yet binding.

Key obligations

• Interested parties must submit comments on the proposed Rules to riskanalytics@bma.bm by 23 June 2016.
• Once made, Class 4 and Class 3B insurers would need to disclose counterparty location for intra-group reinsurance and retrocession arrangements under amended Schedule V.
• Once made, Class 4 and Class 3B insurers would need to disclose gross premiums written in relation to group entities under amended Schedule XVII.
• Once made, insurers would need to complete new Schedules XVIII (Ceded Reinsurance), XIX (Cash and Cash Equivalent Counterparty Analysis), XX (Currency Risk), and XXI (Concentration Risk) in place of the removed Schedule V sub-paragraphs.

Applies to

Class 4 insurers, Class 3B insurers

Deadlines

• 23rd June 2016: Deadline for submitting comments on the proposed Rules to riskanalytics@bma.bm.
• 1 January 2017: Proposed effective date for the amendments, applying to financial years commencing on or after this date.