Notice - Insurance (Prudential Standards) (Class 3A Solvency Requirement) Amendment Rules 2012 (2012-06-19)

Summary

This is a BMA notice publishing draft amendment rules to the Insurance (Prudential Standards) (Class 3A Solvency Requirement) Rules 2011, together with the text of the proposed Amendment Rules 2012. It explains a series of technical and housekeeping changes to how Class 3A insurers calculate and report their solvency capital requirement (BSCR-SME), and invites industry comment before the rules are finalised.

• Policyholder obligations definition: Inserts a new defined term so that reserves reported by insurers must aggregate Form 1A Lines 16, 17(a) and 18, instead of only Line 17(a).
• Credit risk charge (Schedule I, Table 6): Expands the capital charge factors for creditors to reflect the credit ratings of underlying investments in funds held by ceding insurers.
• Operational risk and governance tables (Tables 7, 7A, 7B): Updates the Operational Risk Charge, Corporate Governance Score Table and Risk Management Function table to align with the Insurance Code of Conduct 2010.
• Schedule VI (Schedule of Fixed Income): Removes the requirement for Class 3A insurers to report average/effective duration and convexity by security type.
• Schedule renumbering and content changes: Repeals and replaces Schedules VII, VIII and X, renaming/reissuing them as new Schedules IX (Solvency Self-Assessment), X (Catastrophe Risk Return) and XII (Schedule of Eligible Capital), aligning with Class 4 and 3B reporting and with proposed Form 8 changes under the Insurance Accounts Regulations 1980.
• Proposed effective date: The Rules are proposed to come into operation on 1 January 2013.
• Comment period: Comments on the draft Rules were invited by 15 August 2012, to be sent to policy@bma.bm.

As a draft notice, the document does not itself impose binding obligations; it signals forthcoming changes to Class 3A insurers' solvency capital calculation and prudential reporting schedules once the rules are made final.

Key obligations

• Once effective, Class 3A insurers must report policyholder obligations as the aggregate of Form 1A Lines 16, 17(a) and 18, rather than Line 17(a) alone
• Once effective, Class 3A insurers must apply the updated Schedule I (BSCR-SME) formula and Table 6 credit risk charge factors reflecting ratings of underlying fund investments
• Once effective, Class 3A insurers must complete the replacement Schedules IX (Solvency Self-Assessment), X (Catastrophe Risk Return) and XII (Eligible Capital) in place of former Schedules VII, VIII and X
• Once effective, Class 3A insurers no longer need to report fixed income security duration and convexity data under Schedule VI
• Interested parties were invited to submit comments on the draft Rules to policy@bma.bm by 15 August 2012

Applies to

Class 3A insurers

Deadlines

• 15th August 2012: Deadline for submitting comments on the draft Amendment Rules to policy@bma.bm
• 1st January 2013: Proposed effective/commencement date of the Insurance (Prudential Standards) (Class 3A Solvency Requirement) Amendment Rules 2012

Related documents

• This document amends Insurance (Prudential Standards) (Class 3A Solvency Requirement) Rules 2011