Response to Industry Comments - Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment Rules 2011 (2011-11-22)

Summary

This is a letter from the Bermuda Monetary Authority responding to industry comments received during consultation on the Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment Rules 2011. It clarifies the Authority's intent on several provisions of the Rules and notes some legislative wording changes that will follow, rather than introducing new requirements itself.

• Intra-group transactions: Only material intra-group transactions affecting the Bermuda licensed entity must be reported; reinsurance and retrocessional arrangements must be reported at an aggregate level regardless of amount, separate from the material intra-group transaction threshold.
• Quarterly filings: Class 4 and Class 3B insurers that are not members of a group for which the Authority is Group Supervisor must file quarterly unaudited financial statements; industry preference shifted the filing months to May, August and November, and submitted financial statements must reflect a position no older than two months from the date of submission.
• Top Ten Largest Exposures: Must be filed regardless of whether they meet any materiality threshold.
• Terminology updates: The Rules will be amended to use Chief Executive and Senior Executive (instead of undefined executive management) and group control functions (instead of a group's internal controls reside), for consistency with the Insurance Act and Insurance Code of Conduct.
• Record retention: The Capital and Solvency Return, including the Schedule V Probable Maximum Loss information, must be retained for five years.

The letter is explanatory rather than a standalone set of rules; it confirms interpretation of already-drafted Rules and flags forthcoming legislative amendments (e.g. quarterly filing month changes and terminology fixes) without setting out the full amended text itself.

Key obligations

• Report material intra-group transactions affecting the Bermuda licensed entity in accordance with the Rules' criteria
• Report reinsurance and retrocessional arrangements at an aggregate level regardless of amount
• File quarterly unaudited financial statements if the insurer is a Class 4 or Class 3B insurer not part of a group for which the Authority is Group Supervisor
• Ensure quarterly financial statements filed reflect a financial position no older than two months from the date of submission
• File the Top Ten Largest Exposures regardless of whether they meet a materiality threshold
• Retain the Capital and Solvency Return and related Schedule V documentation for a period of five years

Applies to

Class 4 insurers, Class 3B insurers

Deadlines

• May, August and November: Revised quarterly filing months for financial statements and related returns, per industry preference
• no older than two months from the date of submission: Required currency of financial statements submitted with quarterly filings
• five years: Retention period required for the Capital and Solvency Return and related Schedule V documentation