Notice - Insurance (Prudential Standards) (Class C, Class D and Class E Solvency Requirement) Amendment Rules 2012 (2012-11-14)

Summary

This is a BMA notice, dated 14 November 2012, that finalises housekeeping and policy amendments to the Insurance (Prudential Standards) (Class E Solvency Requirement) Rules 2011, extending them to also cover Class C and Class D insurers. The notice explains that no industry comments were received on the June 2012 draft, but the Authority is adding further amendments before the Rules take effect. Attached to the notice is the draft text of the Amendment Rules and revised Schedules.

• CISSA sign-off removed: The board is no longer required to formally sign off on the Commercial Insurer's Solvency Self-Assessment (CISSA), but under the Code of Conduct the board must still review the CISSA annually and review any material changes.
• Schedule updates: Schedules I, IX and XII are revoked and replaced, and a new Schedule XIII (Class C BSCR and capital and solvency return) is inserted, to align with the Authority's online filing model.
• Phase-in delay: Enhanced capital and solvency requirements for Class C, Class D and Class E insurers are pushed back and will now apply from 1 January 2014, phased in over a three-year period.
• Scope extension: The principal Rules (previously Class E only) are amended throughout to also apply to Class C and Class D insurers, including the BSCR models and capital and solvency return obligations.
• Effective date: The Amendment Rules are stated to be effective as of 1 January 2013, and the Authority advises the amendments are final barring substantive policy issues.

Because this document is issued as a notice accompanying a draft of the Amendment Rules, readers should confirm against the Authority's final published Rules whether any further changes were made before they were brought into force.

Key obligations

• The board of a Class C, Class D or Class E insurer must review the CISSA annually and review any material changes to it, even though formal board sign-off on the CISSA is no longer required.
• Every Class D and Class E insurer must make a capital and solvency return in accordance with Schedule IX and Schedule XII (as revised) of the principal Rules.
• Every Class C insurer must make a capital and solvency return in accordance with the newly inserted Schedule XIII.
• Insurers must undertake and file with the Authority an insurer-specific report comprising a solvency self-assessment of material risks and the quality and quantity of CISSA Capital required.
• No insurer is required to comply with paragraph 3 (BSCR model timing) of the Rules until 1 January 2014.
• Insurers must use the Class C, Class D and Class E BSCR models set out in the revised Schedule I to calculate their BSCR.

Applies to

Class C insurers, Class D insurers, Class E insurers

Deadlines

• 1 January 2013: Stated commencement date on which the Amendment Rules come into operation.
• 1 January 2014: Date from which enhanced capital and solvency requirements apply to Class C, Class D and Class E insurers, phased in over a three-year period; also the date by which compliance with paragraph 3 (BSCR models) is required.