Response to Industry Comments - Insurance Amendment Act 2014

Summary

This is a letter from the Bermuda Monetary Authority responding to industry comments received on its October 2014 consultation on the Insurance Amendment Act 2014. It explains how the Authority addressed stakeholder feedback on several proposed amendments to the Insurance Act 1978 and summarises the resulting drafting decisions, without itself being the final legislation.

• Declaration of Compliance (new Section 15A): Redrafted so insurers declare, at the time of filing statutory financial statements under section 17, whether they have complied with minimum criteria, minimum margin of solvency, enhanced capital requirements, and any licence conditions, rather than being asked to declare both compliance and non-compliance.
• Material Changes (Sections 30JA and 30JB): Confirms that any transaction relating to a Section 99 Companies Act 1981 scheme of arrangement will be treated as a material change requiring notification, without inserting a materiality qualifier; also confirms the Authority's assessment period for certain material changes is being extended from 14 to 30 days, with the Authority committing to respond as quickly as possible.
• Powers of Intervention (Section 32(1)): Clarifies that 'obligations to policyholders' covers both financial and non-financial contractual obligations, and that the Authority may intervene where an insurer's conduct creates significant risk of failing to meet those obligations, even absent insolvency risk (e.g. liquidity problems); insurers may appeal directions under Section 44A.
• Minimum Criteria for Registration (Schedule to the Act): Clarifies that group senior management or group executives without day-to-day management responsibilities for the registered person may qualify as eligible non-executive directors, subject to the Authority's review of overall board composition against the insurer's risk profile.

The letter is explanatory rather than a standalone source of obligations; once the Insurance Amendment Act 2014 is enacted in the form described, insurers should expect the Section 15A declaration requirement and the other clarified provisions to take effect.

Key obligations

• Under the proposed Section 15A(1), every insurer must, at the time of filing its statutory financial statements under section 17, also deliver to the Authority a declaration stating whether it has complied with minimum criteria, minimum margin of solvency, enhanced capital requirements, and any licence conditions for the preceding financial year.

Applies to

insurers