Response to Disclosure and Transparency Consultation Paper Comments (2009-12-14)

Summary

This is a letter from the Bermuda Monetary Authority responding to industry comments on its earlier Consultation Paper on Disclosure and Transparency. It clarifies the Authority's positions on a range of issues raised by stakeholders rather than introducing new rules, and applies specifically to Class 4 and 3B (Re)Insurers, with Class 3A insurers and captives to be addressed separately.

• Disclosures to foreign regulators: The Authority will accept disclosures made to home state regulators where their frameworks are assessed as broadly equivalent and the information remains available to the Authority on request.
• Materiality and intra-group disclosure: Materiality is defined using a 5% (or 10% cumulative) reduction in total statutory capital and surplus plus qualitative risk factors; all intra-group transactions, including with wholly-owned subsidiaries, and general/administrative intra-group receivables and payables must be disclosed.
• Underwriting and reporting: Insurers must describe their underwriting strategy generally, including planned focus areas and anticipated material changes; the Authority may permit alternative reporting formats or segmented reporting on application.
• Investments and derivatives: Exposure analysis should be based on nominal exposures exceeding 5% of total investment assets, disclosed by individual issuer.
• Group disclosure and reporting: Legal entity risk management and governance disclosures may be replaced by group-level disclosures where board oversight is demonstrated; group management accounts must include at minimum an unaudited income statement and balance sheet, with quarterly reporting to take effect once the group-wide supervisory regime is adopted.
• Public disclosure and service providers: The Authority will generally publish filings within one to two months of receipt on its public filings webpage; statutory return declarations apply to individuals in board or senior management roles as defined under Section 1A of the Insurance Act 1978, extending to service providers only where they perform those specific duties.

The letter is primarily explanatory, clarifying how the proposed disclosure and transparency framework will operate in practice; it does not itself set out new deadlines beyond indicating that Class 3A engagement would begin in 2010 and that quarterly group reporting starts once group-wide supervision commences.

Key obligations

• Insurers must disclose all intra-group transactions, including those with wholly-owned subsidiaries, and related general and administrative receivables and payables.
• Insurers must disclose exposure analyses for investments and derivatives based on nominal exposures exceeding 5% of total investment assets, itemised by individual issuer.
• Insurers must provide a general description of their underwriting strategy, including major planned focus areas and anticipated material changes for the reporting year.
• Groups must submit a management account including at minimum an unaudited income statement and balance sheet, on a general purpose or statutory basis.
• Individuals fulfilling board or senior management roles under Section 1A of the Insurance Act 1978 must provide formal declarations accompanying statutory returns.

Applies to

Class 4 (Re)Insurers, Class 3B (Re)Insurers, Class 3A insurers (to be addressed separately), captives

Deadlines

• beginning in 2010: The Authority will begin dialogue with Class 3A insurers before proposing enhancements specific to that segment.
• 1-2 months of receipt: The Authority will generally publish received documents/filings on its website within this period.
• upon adoption of the group-wide supervisory regime: Group quarterly reporting becomes effective once the group-wide supervisory regime is adopted.