Notice - Insurance (Eligible Capital) Amendment Rules 2013 (2013-10-31)

Summary

This is a Bermuda Monetary Authority notice confirming the final form of the Insurance (Eligible Capital) Amendment Rules 2013, following public consultation on draft rules issued in July 2013. It summarises the substantive changes made to the Insurance (Eligible Capital) Rules 2012 and confirms the amendments' effective date.

• Encumbered asset offset: The market's proposal to allow capital requirements associated with policyholder obligations to be offset against excess encumbered assets transferred from Tier 1 to Tier 2 capital has been incorporated into the Rules.
• Housekeeping amendments: Other minor, largely technical amendments were made to the Rules following internal review and market feedback during consultation.
• Stakeholder letter: The Authority has published a separate general stakeholder letter responding to issues raised during the consultation process.
• Technical changes: The amendment rules alter the definitions and calculation methodology in paragraph 2 of the principal Rules, including how policyholder obligations, ceding insurer reserves, capital requirements, and encumbered assets pledged for risk management purposes are treated across Forms 1A, 4 and 6 for Class 3A, 3B, 4, C, D, E and composite insurers.

The amendments to the Insurance (Eligible Capital) Rules 2012 take effect on 1 January 2014, as previously indicated by the Authority.

Key obligations

• Insurers within scope of the Insurance (Eligible Capital) Rules 2012 must apply the amended eligible capital calculation methodology (including the treatment of policyholder obligations, ceding insurer reserves, and encumbered assets) from the effective date of the amendment rules.

Applies to

Class 3A insurers, Class 3B insurers, Class 4 insurers, Class C insurers, Class D insurers, Class E insurers, composite insurers

Deadlines

• 1 January 2014: Effective date on which the Insurance (Eligible Capital) Amendment Rules 2013 come into force and must be applied.