Guidance Notes for Commercial Insurers and Insurance Groups' Statutory Reporting Regime (31 March 2024)

Summary

This is BMA guidance (31 March 2024) explaining the statutory reporting regime for Bermuda's commercial insurers and insurance groups, covering both the Statutory Financial Statements (SFS) framework under Section 17A of the Insurance Act 1978 and the Economic Balance Sheet (EBS) valuation principles used to calculate the Enhanced Capital Requirement (ECR). It consolidates 2015 reforms with 2023/2024 refinements, including a new standalone Schedule of EBS Valuation Principles (EBS Rules).

• GAAP financial statements: Commercial insurers must prepare financial statements under IFRS, GAAP applicable in Bermuda, Canada, the UK or the US, or other GAAP recognised by the Authority, audited by an approved auditor and published by the Authority.
• Condensed accounts option: Class 3A, Class C and Class D insurers may elect to produce condensed consolidated GAAP financial statements (per Schedule VIII/IX of the Insurance Account Rules) instead of full consolidated statements, though full statements are encouraged; condensed statements must still be audited.
• Unconsolidated SFS filing: Insurers with consolidated GAAP subsidiaries must also file an unconsolidated statutory balance sheet, income statement and statement of capital and surplus, used for MSM, liquidity ratio and class-of-registration determinations.
• EBS technical provisions: Insurers and insurance groups must apply the EBS Rules for best estimate calculations, risk margin methodology, discounting, counterparty default allowances and simplifications, with documented justification where simplified approaches (e.g. risk margin as a percentage of best estimate) are used.
• Long-term business transition: Insurers with long-term business subject to the sixteen-year transitional arrangements must perform both transitional and current reserve calculations annually and incorporate the transition adjustments into specified EBS balance sheet lines (20-27 for technical provisions, 27A for risk margin).

The guidance also clarifies that the Insurance Accounts Regulations 1980 continue to apply only to limited-purpose insurers, since the Insurance Accounts Rules (introduced in 2015 and refined for 2024) now govern commercial insurers' statutory reporting format and content.

Key obligations

• Commercial insurers must prepare financial statements under IFRS, recognised GAAP (Bermuda, Canada, UK or US), or other Authority-approved GAAP, audited by an approved auditor (Section 17A of the Insurance Act 1978).
• Class 3A, Class C and Class D insurers electing condensed consolidated GAAP financial statements must follow the format in Schedule VIII and Schedule IX of the Insurance Account Rules and have these audited by an approved auditor.
• Commercial insurers must file an unconsolidated statutory balance sheet, income statement and statement of capital and surplus (unconsolidated SFS) in the format prescribed by the Insurance Account Rules.
• Insurers and insurance groups must calculate technical provisions, best estimates and risk margins in accordance with the EBS Rules, documenting and justifying any simplified methodologies used (e.g. risk margin as a percentage of best estimate) by line of business.
• Insurance groups using aggregation or non-entity-specific parameterisation simplifications for group risk margin must assess and document compliance with the proportionality requirements in paragraph 8 of the EBS Rules.
• Insurers subject to the sixteen-year transitional arrangements for long-term business must perform both transitional and current reserve calculations each year and record the resulting adjustments in EBS balance sheet lines 20-27 (technical provisions) and 27A (risk margin).

Applies to

commercial insurers, insurance groups, reinsurers, Bermuda Groups, Class 3A insurers, Class 3B insurers, Class 4 insurers, Class C insurers, Class D insurers, Class E insurers, limited-purpose insurers