Guidance Notes for Reclassification of Long-Term Insurers in Accordance with the Insurance Amendment (No. 3) Act 2010

Summary

These guidance notes explain how existing Long-Term insurers in Bermuda must apply to be reclassified into one of five new licence classes (Class A through E) created by the Insurance Amendment (No. 3) Act 2010. They set out the application process, required supporting documents, fees, and the criteria the Bermuda Monetary Authority will use when exercising discretion over classification, including for affiliated reinsurers and unrelated business thresholds.

• Who must apply: All Long-Term insurers registered before 1 January 2011 must apply for reclassification into Class A, B, C, D or E.
• Application documents: A completed Form T-1, the company's original Certificate of Registration, most recent audited statutory financial statements, and management accounts as at 31 December 2010 (or more recent).
• Fees: Application fee of $500 for Class A and B, and $1,000 for Class C, D and E.
• Affiliated reinsurers: A (re)insurer assuming only affiliated reinsurance is registrable as Class C; if it also assumes non-affiliated reinsurance and exceeds $250 million in total assets (less segregated account amounts) tied to that non-affiliated business, it must register as Class D or E.
• Unrelated business test: Insurers whose net premiums written and/or long-term insurance reserves exceed the 20 percent unrelated business threshold must re-register as Class C, D or E; the test applies to net (not gross) position.
• Existing approvals: Existing regulatory approvals (e.g. section 56 directions, asset and capital approvals) remain in force through reclassification, subject to BMA review and consultation before any amendment or revocation.
• Early reclassification incentive: Insurers seeking reclassification by 31 March 2011 can have 2011 annual fees based on the new class, and those with $500 million or more in long-term assets who reclassify by that date (into a class other than E) are exempt from the 2011 solvency reporting trial run.

Failure to apply for reclassification by the deadline may result in the Authority cancelling the insurer's registration under Section 31(4) of the Insurance Amendment Act 2010. The guidance is non-statutory and informal; insurers remain responsible for ensuring compliance with the underlying legislation.

Key obligations

• All Long-Term insurers registered before 1 January 2011 must submit a reclassification application (Form T-1) by 30 September 2011.
• Applications must be accompanied by the company's original Certificate of Registration, most recent audited statutory financial statements, and management accounts as at 31 December 2010 or more recent.
• Applicants must pay the applicable fee: $500 for Class A/B or $1,000 for Class C/D/E.
• (Re)insurers meeting the affiliated-reinsurance or 20 percent unrelated business criteria must register in the corresponding class (C, D or E) rather than A or B.
• Insurers wishing 2011 annual fees or solvency trial run treatment based on a different class than their asset-based determination must apply for reclassification by 31 March 2011.

Applies to

Long-Term insurers, (re)insurers conducting long-term business

Deadlines

• 30th September 2011: Deadline for all existing Long-Term insurers to submit an application for reclassification into Class A, B, C, D or E; failure may lead to cancellation of registration.
• 31st December 2010: Amendment Act came into force, creating the five new long-term insurance classes.
• 31 March 2011: Deadline for insurers to seek and receive reclassification in order to have 2011 annual fees determined by the new classification, and for insurers exceeding $500 million in assets to be exempt from the 2011 solvency reporting trial run (if reclassified into a class other than E).
• 1 January 2011: Applications to conduct new long-term business processed after this date will be registered directly as Class A, B, C, D or E.