Notice - Insurance (Prudential Standards) (Class C, Class D and Class E Solvency Requirement) Amendment Rules 2015 (2015-01-22)

Summary

This is a BMA notice and consultation draft for the Insurance (Prudential Standards) (Class C, Class D and Class E Solvency Requirement) Amendment Rules 2015. It sets out proposed changes to the 2011 Rules to implement the Economic Balance Sheet (EBS) framework announced in the December 2014 consultation paper, and invites industry comment before finalisation.

• New Schedule XIV: Introduces the Class C, Class D and Class E Statutory Economic Balance Sheet (Form 4EBS), replacing the prior Form 4 as the basis for BSCR calculations.
• Consequential Schedule changes: Amends other Schedules (including a repealed and replaced Schedule I) so that BSCR risk charges are calculated using EBS-based figures, with some Schedules also required on an unconsolidated basis.
• New Schedule XV: Sets initial requirements for the Approved Actuary's Opinion on EBS technical provisions, to be supported by a forthcoming Guidance Note and further consultation.
• New Schedule XVI: Requires information to support calculation of the Minimum Margin of Solvency, including details of affiliates, their net premiums, assets and MSM by jurisdiction.
• New actuarial opinion filing: Adds paragraph 3A requiring insurers to file an approved actuary's opinion on technical provisions (per Line 27C of Form 4EBS and Schedule XV) alongside the capital and solvency return.

The proposed effective dates are staggered: the general EBS-related amendments would apply to submissions following the end of the financial year starting on or after 1 January 2016, while the technical provisions changes would apply from the financial year starting on or after 1 January 2018 (except for dual-licensed Long-Term insurers with a Class 3B or Class 4 licence, for which the technical provisions changes would also start from 1 January 2016). As a consultation notice, the Rules were not yet in final force; BMA invited comments by 27 February 2015.

Key obligations

• Insurers must, at the time of furnishing their capital and solvency return, also file with the Authority an approved actuary's opinion addressing technical provisions calculated under Line 27C of Form 4EBS and Schedule XV.
• Insurers must calculate the Bermuda Solvency Capital Requirement (BSCR) using the new Form 4EBS (Schedule XIV) rather than the previous Form 4, once the amendments take effect.
• Insurers must provide certain Schedule information on both consolidated and unconsolidated bases to support the BSCR calculation.
• Insurers must submit Schedule XVI information (affiliate details, net premiums, assets, and Minimum Margin of Solvency by jurisdiction) to support the Minimum Margin of Solvency calculation.
• Interested parties were invited to submit comments on the proposed Rules to policy@bma.bm by 27 February 2015.

Applies to

Class C insurers, Class D insurers, Class E insurers, Long-Term business insurers dual-licensed as Class 3B or Class 4

Deadlines

• 27th February 2015: Deadline for interested parties to submit comments on the proposed Amendment Rules to policy@bma.bm.
• submissions made following the end of the financial year starting on or after 1st January 2016: Proposed effective date for the general EBS-related amendments (and for technical provisions changes for dual-licensed Long-Term insurers with Class 3B or Class 4 licences).
• submissions made following the end of the financial year starting on or after 1st January 2018: Proposed effective date for the technical provisions requirements generally.

Related documents

• This document amends Insurance (Prudential Standards) (Class C, Class D and Class E Solvency Requirement) Rules 2011