Notice - Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Amendment Rules 2016 (2016-05-09)

Summary

This is a Bermuda Monetary Authority notice consulting on proposed amendments to the Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Rules. It sets out changes to the group reporting schedules used by insurance groups to disclose reinsurance, cash counterparty, currency and concentration risk exposures, and invites industry comment before finalisation.

• Schedule restructuring: Removes sub-paragraphs (d), (x), (y) and (z) from Schedule V (Schedule of Risk Management) and replaces them with four new standalone Schedules XVIII to XXI covering expanded particulars of ceded reinsurance, cash and cash equivalent counterparty analysis, currency risk, and concentration risk.
• New disclosure on intra group reinsurance: Inserts new sub-paragraph (c)(ii)(AA) requiring insurance groups to disclose the location of counterparties in intra-group reinsurance and retrocession arrangements, to help identify cross-border activity.
• Gross premium disclosure: Amends sub-paragraph (b)(viii) so insurance groups must disclose gross (not just net) premiums written by entities within the group's structure.
• Modified coinsurance treatment: Amends the Best Estimate Provision definition in Schedule XIV (Group Statutory Economic Balance Sheet) to include Modified Coinsurance arrangements for Long-Term business, with corresponding supporting assets to be included in lines 1 to 15 of Form 1EBS.
• Comment period: The Authority invites written comments on the proposed Rules, to be sent to riskanalytics@bma.bm.
• Proposed effective date: The Authority proposes the amendments take effect and apply to financial years commencing on or after 1 January 2017.

As a consultation notice, the document does not itself impose final binding obligations; it describes proposed rule changes and solicits feedback before the amendment rules are made and brought into force.

Key obligations

• Stakeholders wishing to comment on the proposed Rules must submit comments to riskanalytics@bma.bm by the stated deadline.
• Once made, insurance groups will be required to disclose counterparty location for intra-group reinsurance and retrocession arrangements under new sub-paragraph (c)(ii)(AA) of Schedule V.
• Once made, insurance groups will be required to disclose gross premiums written (in addition to net) for entities within the group structure under amended sub-paragraph (b)(viii).
• Once made, insurance groups will be required to complete new Schedules XVIII to XXI covering expanded ceded reinsurance particulars, cash and cash equivalent counterparty analysis, currency risk, and concentration risk.
• Once made, insurance groups must include assets supporting Modified Coinsurance arrangements for Long-Term business in lines 1 to 15 of Form 1EBS.

Applies to

insurance groups

Deadlines

• June 23rd 2016: Deadline for submitting comments on the proposed Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Amendment Rules 2016 to riskanalytics@bma.bm.
• 1 January 2017: Proposed date on which the amendment rules would come into operation and apply to financial years commencing on or after this date.