The Insurance (Group Supervision) Rules 2011 (Draft 2010-12-31)

Summary

This is a draft set of rules from the Bermuda Monetary Authority (BMA) that would establish a comprehensive group supervision framework for insurance groups for which the BMA is group supervisor. The draft was circulated for consultation on 31 December 2010 and has not yet been brought into force (the commencement date is left blank in the text). It sets out corporate governance, risk management, and group-level solvency and reporting requirements to be imposed on the parent board and the designated insurer of an insurance group.

• Parent board governance: Requires the ultimate parent's board to include independent directors, manage conflicts of interest, keep board membership under review for fitness and propriety, and establish group functions with clear accountability.
• Group risk management framework: Requires establishment and documentation of policies covering investment, liquidity, concentration, market, credit, operational, strategic, reputational, group, legal and insurance underwriting risk, with at least annual review of significant policies.
• Independent group functions: Requires the parent board to establish actuarial, compliance, internal audit and risk management functions independent of underwriting and financial operations.
• Solvency and capital: Sets a minimum margin of solvency for the group and requirements for available statutory capital and surplus.
• Financial reporting to the Authority: Requires preparation of group financial statements, statutory financial statements, and an annual group statutory financial return, together with an opinion from the group actuary and an insurance group business solvency certificate signed by parent board directors and the group CEO.
• Records and event reporting: Requires certain group records to be kept in Bermuda and requires the designated insurer to report specified events to the Authority.
• Reinsurance disclosure: Requires the group to furnish the Authority with particulars of ceded reinsurance for its top ten unaffiliated reinsurers and any reinsurer with recoverable balances exceeding 15% of the group's statutory capital and surplus.

Because this is still a draft consultation document, the obligations described are proposed requirements that had not yet taken legal effect at the time of this text; readers should confirm current status and any final rules against the BMA's published register before relying on specific provisions.

Key obligations

• The parent board must include independent directors without executive responsibility, as the Authority considers appropriate
• The parent board must establish, document, and keep under review group risk management and internal control policies, reviewing significant policies at least annually
• The parent board must establish independent group functions for actuarial, compliance, internal audit and risk management
• The designated insurer must take appropriate measures to ensure the parent board or insurance group complies with the Rules, including establishing a communication mechanism to monitor compliance
• The group must maintain a minimum margin of solvency and comply with requirements relating to available statutory capital and surplus
• The group must prepare and submit group financial statements, statutory financial statements and an annual group statutory financial return to the Authority
• An insurance group business solvency certificate must be signed by at least two parent board directors and the group's chief executive officer
• A group actuary's certificate/opinion on group liabilities must be obtained, signed and dated
• The group must keep certain records in Bermuda
• The designated insurer must report certain specified events to the Authority
• The group must furnish the Authority with particulars of ceded reinsurance for its top ten unaffiliated reinsurers and any reinsurer with recoverable balances exceeding 15 percent of the group's statutory capital and surplus

Applies to

insurance groups, parent board/parent company of an insurance group, designated insurer

Deadlines

• [ ] (commencement date left blank in draft): Date on which the Rules would come into operation, not yet specified in this draft
• annually: Significant group risk management policies and procedures must be reviewed at least annually