Notice - Insurance (Group Supervision) Amendment Rules 2012 (2012-06-19)

Summary

This is a BMA consultation notice announcing draft amendments to the Insurance (Group Supervision) Rules 2011, which govern group-level solvency and governance requirements for insurance groups. The notice explains the substance of the proposed changes and invites industry comment before the rules are finalised.

• Capital instrument grandfathering: Eligible capital instruments that otherwise qualify for a tier of capital but lack an indefinitely cancellable/deferrable coupon feature may continue to be counted toward the ECR until 1 January 2024 (extended from the previously stated 2018).
• Insurance reserves defined: A new definition of insurance reserves is added, referencing the aggregate of amounts on lines 17(d) and 27(d) of Form 1, Schedule 1, for use in group actuary reporting.
• Compliance function reworded: The compliance function's responsibilities are clarified as identifying, measuring, monitoring and reporting compliance risk across the insurance group and developing/implementing mitigation strategies.
• Audit function and internal auditor independence: The audit function wording is clarified, and rules on internal auditor independence and compensation (including performance-based pay) are tightened.
• Schedule 1 form changes: Forms 1, 2 and 8 are revised to add reinsurance receivables from foreign and domestic affiliates, expand segregated accounts company categories, and expand preferred share disclosure to include shares issued by a subsidiary.
• Terminology changes: Group Actuary's Certificate is renamed the Group Actuary's Opinion in Schedule 2, and parent company responsibility language is clarified throughout.
• Housekeeping: Various other minor wording and cross-reference corrections are made throughout the principal Rules.

Because this is a draft notice, the changes are not yet in force. The BMA invited written comments on the draft rules by 15 August 2012, and the draft text itself states the amendments would come into operation on 1 January 2013 if adopted in this form.

Key obligations

• Interested parties should submit comments on the draft Insurance (Group Supervision) Amendment Rules 2012 to policy@bma.bm by 15 August 2012.
• Once in force, insurance groups must apply the new definition of insurance reserves (aggregate of Form 1 Schedule 1 lines 17(d) and 27(d)) for group actuary reporting purposes.
• Once in force, the compensation structure for persons responsible for the group internal audit function must not compromise their independence, and any performance-based component must be assessed against the function's own performance objectives.
• Once in force, group compliance functions must identify, measure, monitor and report compliance risk across the insurance group and develop and implement strategies to mitigate material compliance risks.
• Once in force, group financial statements must be accompanied by an unaudited statement for public disclosure regarding the group's compliance with the MSM and ECR.

Applies to

insurance groups, parent companies of insurance groups, designated insurers, group actuaries

Deadlines

• 15th August 2012: Deadline for submitting comments on the draft Insurance (Group Supervision) Amendment Rules 2012 to policy@bma.bm.
• January 1, 2013: Date on which the draft amendment rules state they would come into operation if adopted.
• 1st January, 2024: Extended date until which certain non-compliant eligible capital instruments may continue to be included in the applicable capital tier.

Related documents

• This document amends Insurance (Group Supervision) Rules 2011