Notice - Insurance (Prudential Standards) (Class C, Class D and Class E Solvency Requirement) Amendment Rules 2016

Summary

This is a Bermuda Monetary Authority Notice, dated 9 May 2016, setting out and inviting comment on proposed draft Insurance (Prudential Standards) (Class C, Class D and Class E Solvency Requirement) Amendment Rules 2016. It attaches the draft amendment rules themselves, which restructure several prudential reporting schedules for Class C, D and E insurers and add a new AML questionnaire.

• Schedule restructuring: Removes particulars of ceded reinsurance, cash/cash equivalent counterparty analysis, currency risk and concentration risk from Schedule V and creates them as new standalone Schedules XVIII to XXI (and corresponding Parts in Schedule XIII).
• Reinsurance counterparty disclosure: Requires Class C, D and E insurers to disclose the location of counterparties involved in intra-group reinsurance and retrocession arrangements.
• Best Estimate Provision definition: Amends Schedule XIV to include Modified Coinsurance arrangements for Long-Term business within the Best Estimate Provision, with corresponding assets to be reported in Lines 1-15 of Form 4EBS.
• Gross premium disclosure: Amends Schedule XVII to require disclosure of gross (not just net) premiums written in relation to entities within the insurer's structure.
• New AML Questionnaire: Inserts a new Schedule XVIII (later Schedule XXII) 'AML Questionnaire and Assessment' applying to Long-Term insurers that write any direct long-term business.
• EBS Valuation basis definition: Inserts a new defined term 'EBS Valuation basis' and replaces references to 'consolidated' basis throughout multiple schedules with 'EBS Valuation' basis.
• Housekeeping amendments: Various other minor drafting corrections across Schedules I, II, IIA, VI, VIII, VIIIA, XII and XIII.

The Authority invited comments on the draft Rules by 23 June 2016 and, as previously advised, proposed that all amendments become effective from 1 January 2017, applying to financial years commencing on or after that date. Because this document is a consultation notice attaching draft rules, its legal status (i.e. whether the rules were finalised as drafted) is not confirmed by this text alone.

Key obligations

• Class C, D and E insurers must disclose, in relation to intra-group reinsurance and retrocession arrangements reported under Schedule V, the location of the counterparties involved.
• Class C, D and E insurers must include Modified Coinsurance arrangements for Long-Term business within the Best Estimate Provision definition under Schedule XIV, with corresponding supporting assets reported in Lines 1-15 of Form 4EBS.
• Class C, D and E insurers must disclose gross (in addition to net) premiums written in relation to entities within the insurer's structure under Schedule XVII.
• Long-Term insurers that write any direct long-term business must complete the new AML Questionnaire and Assessment schedule (Schedule XVIII/XXII).
• Insurers must report reinsurance, cash and cash equivalent counterparty, currency risk and concentration risk information under the newly created standalone Schedules XVIII to XXI (previously embedded in Schedule V), following the associated instructions for each schedule.

Applies to

Class C insurers, Class D insurers, Class E insurers, Long-Term insurers writing direct long-term business

Deadlines

• 23rd June 2016: Deadline for submitting comments on the proposed draft Rules to riskanalytics@bma.bm
• 1 January 2017: Proposed effective date for the amendments; Rules come into operation on this date and apply to financial years commencing on or after 1 January 2017