Notice - Insurance (Prudential Standards) (Class C, Class D and Class E Solvency Requirement) Amendment Rules 2014 (2014-06-18)

Summary

This is a 2014 BMA consultation notice proposing amendments to the Insurance Prudential Standards Rules for Class C, Class D and Class E insurers. The proposed changes add a new Schedule VIIIA and Part VIIIA covering the Schedule of Long-Term Variable Annuity Internal Capital Model, requiring affected insurers to file detailed quantitative data and an accompanying actuarial memorandum with the Authority.

• Quantitative schedule: Insurers using an internal capital model for long-term variable annuity business would need to report policy-level data (BSCR statutory reserve, policy count, account value, guarantee value, net amount at risk) broken down by policy type, years since issuance, in/out of the money position, fund volatility, and years to next maturity.
• Capital requirement table: Insurers would report internal model-based capital requirements with and without hedging, results of prescribed economic stress tests (equity shock, volatility increase, interest rate shift), and stresses to mortality and policyholder behavior assumptions.
• Actuarial memorandum: Insurers would be required to file an actuarial memorandum covering executive summary, business overview, key risk exposures, model description, assumptions, reinsurance, hedging, other risk mitigation, results/model output, and disclosure of significant changes from the prior filing, reviewed and signed by the Approved Actuary.

The Authority invited public comments on the proposed Rules by 5 September 2014 and proposed an effective date of 1 January 2015. As a consultation notice, this document reflects a proposal rather than a final binding requirement, and its status is now superseded.

Key obligations

• Affected insurers would be required to complete the Schedule of Long-Term Variable Annuity Internal Capital Model providing policy-level data broken down by policy type, years since issuance, in/out of the money status, fund volatility, and years to next maturity
• Affected insurers would be required to report the internal model-based capital requirement, prescribed economic stress test results, and stresses to actuarial assumptions, both with and without hedging
• Affected insurers would be required to file an actuarial memorandum with the Authority covering executive summary, business overview, key risk exposures, model description, assumptions, reinsurance, hedging, other risk mitigation arrangements, and results/model output
• The actuarial memorandum must be reviewed and signed by the Approved Actuary and must indicate any significant changes from the last memorandum filed with the Authority
• Interested parties were invited to submit comments on the proposed Rules to policy@bma.bm by 5 September 2014

Applies to

Class C insurers, Class D insurers, Class E insurers

Deadlines

• 5th September 2014: Deadline for submitting comments on the proposed Rules to policy@bma.bm
• 1st January 2015: Proposed effective date for the amendment to become effective