Response to Industry Comments - Enhancements to Bermuda's Insurance Regulatory Regime (2015-06-12)

Summary

This is the Bermuda Monetary Authority's formal response to industry comments received on its 2015 consultation paper and draft legislation regarding enhancements to Bermuda's insurance regulatory regime. It addresses stakeholder concerns and confirms the Authority's final positions on shareholder controller notifications, head office requirements, outsourcing of senior management functions, and the new public disclosures regime for commercial insurers and insurance groups.

• Shareholder controller disposals: The Authority will retain the existing 50 percent notification threshold but adds a new Section 30EA requiring notification (not approval) when a shareholder controller's holding drops below 50 percent, to give the Authority better visibility of ownership structure.
• Head office requirement: All commercial insurers, except those holding a permit under section 3 of the Non-Resident Insurance Undertakings Act 1967 or section 134 of the Companies Act 1981, must establish a head office in Bermuda; the Authority will apply a proportionality principle and may treat a qualifying principal office as the head office. No reclassification exercise or additional exemptions will be offered.
• Outsourcing of senior executive functions: Outsourcing of senior executive roles to an insurance manager remains permitted for lower risk commercial insurers, but larger, higher risk insurers should generally not outsource these functions. The Insurance Code of Conduct will be strengthened with specific conditions under which outsourcing should not occur (adverse effects on governance/risk management, increased operational risk, impaired supervision, or harm to policyholder interests).
• Public disclosures regime: Applies to all commercial insurers and insurance groups; the Authority may grant exemptions or modifications for legal entity Financial Condition Reports (FCRs) where it is Group Supervisor, or where disclosure would cause competitive disadvantage or breach confidentiality obligations, subject to a written application.
• FCR publication mechanics: Insurers/groups with a website must publish the FCR on it within 14 days of filing with the Authority; those without a website must furnish a copy to requesters within ten days of a written request. Existing equivalent public disclosures may be referenced in the FCR to avoid duplication.
• Significant event disclosure: A significant event must be filed with the Authority within 14 days of the event and made publicly available within 30 days of the event; the board of directors determines whether an event is significant. Where public disclosure would otherwise precede required SEC disclosure, the Authority may allow simultaneous disclosure.

The Authority confirmed that the public disclosures regime will apply to all commercial insurers and insurance groups from 1 January 2016, with the first filings due in 2017, and it plans to hold industry meetings and issue further guidance on implementation, including on head office criteria and FCR content.

Key obligations

• Commercial insurers (other than those exempted under the Non-Resident Insurance Undertakings Act 1967 s.3 or Companies Act 1981 s.134) must establish a head office in Bermuda demonstrating direction and management from Bermuda.
• Shareholder controllers must notify the Authority under new Section 30EA when their shareholding decreases below the 50 percent threshold.
• Insurers seeking an exemption or modification of public disclosure requirements (for competitive disadvantage or confidentiality reasons) must submit a written application to the Authority.
• Commercial insurers and insurance groups with a website must publish their Financial Condition Report on the website within 14 days of filing it with the Authority.
• Commercial insurers and insurance groups without a website must furnish a copy of the FCR to a requester within ten days of receiving a written request.
• A significant event must be filed with the Authority within 14 days of the event.
• A significant event must be made publicly available within 30 days of the event, as determined by the insurer's or group's board of directors.
• The board of directors of the insurer or insurance group must determine whether an event qualifies as a significant event for public disclosure purposes.
• All commercial insurers and insurance groups must comply with the public disclosures regime from 1 January 2016, with first filings due in 2017.

Applies to

commercial insurers, insurance groups, shareholder controllers, insurance managers

Deadlines

• 1st January, 2016: Public disclosures regime becomes applicable to all commercial insurers and insurance groups.
• 2017: First filing under the public disclosures regime occurs.
• within 14 days of filing the FCR: Insurers/groups with a website must publish the Financial Condition Report on their website.
• within ten days of receipt of a written request: Insurers/groups without a website must furnish a copy of the FCR to the requester.
• within 14 days of the event: Significant event must be filed with the Authority.
• 30 days after the event: Significant event must be made publicly available.