Feedback on 2016 FCR Filings and Guidance to Market for 2017 Year-end Filing (2018-03-09)

Summary

This is BMA guidance reviewing the first round of Financial Condition Report (FCR) filings made by insurers and insurance groups for 2016, issued under the Insurance (Public Disclosure) Rules 2015 and Section 30 of the Insurance (Group Supervision) Rules 2011. It sets out general weaknesses observed and the Authority's baseline expectations for the 2017 year end FCR filing.

• Data integrity: Insurers must improve accuracy, completeness and consistency of figures (licence details, technical provisions, organisational charts, MMS/ECR ratios, eligible capital) and ensure the declaration section is signed off.
• Group FCR: Insurance groups filing a group FCR under a Section 6C modification must clearly distinguish quantitative information and narratives specific to each member insurer within scope.
• Cohesiveness: FCRs should not simply repurpose SEC or other filings; content must be tailored to cover all relevant jurisdictions, not just the US, and jurisdiction specific terms (Code, Act, Law, Rules) should be defined so the report stands alone.
• Big picture perspective: Reports should go beyond restating Rules wording and instead explain how the insurer actually complied, linking risk profile, risk management and solvency self assessment to capital management policy; an Executive Summary is optional but encouraged.
• Specific disclosure expectations: Insurers should indicate the measurement basis (GAAP, statutory, EBS) for figures, disclose valuation bases for all asset and liability classes, provide detailed investment classification, disclose risk margin and uncertainty in technical provisions, disclose stress test impact on ECR, fungibility and transferability of eligible capital, subsequent material events (including M&A), remuneration policy, senior executive qualifications, and centralised group governance practices.

The guidance does not create new binding rules but clarifies the Authority's supervisory expectations for compliance with the existing Public Disclosure and Group Supervision Rules ahead of the 2017 year end filing cycle.

Key obligations

• Insurers and insurance groups must ensure FCR data (licence information, technical provisions, organisational charts, MMS/ECR ratios, eligible capital figures) is complete, accurate and consistent, and include the required declaration sign off
• Insurance groups using a Section 6C filing modification must separately identify and disclose quantitative and narrative information specific to each member insurer included in the group FCR
• Insurers must customise FCR narratives to cover all relevant jurisdictions and define jurisdiction-specific terms (Code, Act, Law, Rules) so the FCR is a stand-alone document
• Insurers must disclose the source and measurement basis of all figures reported (GAAP/10-K, statutory, or EBS)
• Insurers must disclose valuation bases for all asset and liability classes, including accounts and premium receivables, real estate and derivatives, not just investment classes
• Insurers must disclose the risk margin amount and the level of uncertainty in determining technical provisions
• Insurers must disclose the impact of stress testing on the ECR and information on fungibility and transferability of eligible capital relative to the ECR
• Insurers must disclose material subsequent events, including M&A activity, affecting FCR information
• Insurers must include a brief description of remuneration policy for employees
• Insurers must disclose qualifications of senior executives, not only board directors
• Insurers that are part of a group with centralised governance and risk management must describe those group-level practices in their stand-alone FCR

Applies to

insurers, insurance groups