Notice - Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Amendment Rules 2012 (2012-11-14)

Summary

This is a Bermuda Monetary Authority notice summarising industry comments on, and confirming near-final proposals for, the Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Amendment Rules 2012. The amendment rules revise the 2011 principal Rules governing group capital and solvency reporting for Bermuda insurance groups. The notice attaches the draft amending instrument itself, which remains subject to final revision if substantive policy issues arise.

• Declaration signatories: The group capital and solvency return declaration must now be signed by two directors of the designated insurer (one of whom may be the chief executive) and either the chief risk officer or chief financial officer of the parent company.
• Currency reporting: Group capital and solvency return amounts must be stated in Bermuda dollars; where accounts are kept in a foreign currency they must be converted to the Bermuda dollar equivalent, with the US dollar to Bermuda dollar exchange rate deemed to be 1:1.
• Intra-group transaction disclosure: Paragraph 8(2)(b) and Schedule V are amended to expand required disclosure of material intra-group transactions, intra-group reinsurance/retrocession arrangements, and the ten largest unaffiliated counterparty exposures exceeding 10% of statutory capital and surplus.
• Solvency self-assessment: The parent board must review policies, processes and procedures to assess the group's material risks and self-determine its capital requirement at least annually, and the insurance group must file with the Authority its most recent insurer-specific solvency self-assessment report.
• Schedule revisions: Schedules I, IVB, V, IX and XII are revoked and replaced, and Schedules VII and VIII are amended (including deletion of the Net Premiums Written column), affecting the reporting templates and capital charge tables used by insurance groups.
• Housekeeping: Minor amendments were made throughout to keep the Rules consistent with the Insurance Act 1978 and other prudential standard rules.

As a notice describing draft rules, this document itself does not create binding obligations beyond inviting final industry comment; the substantive requirements take effect once the Rules are made, with a stated commencement date in the draft of 1 January 2013.

Key obligations

• Designated insurers must have their group capital and solvency return declaration signed by two directors (one of whom may be the chief executive) and either the parent company's chief risk officer or chief financial officer
• Group capital and solvency returns must be reported in Bermuda dollars, converting foreign currency amounts using the applicable bank exchange rate (US dollar to Bermuda dollar deemed 1:1)
• Insurance groups must disclose material intra-group transactions, intra-group reinsurance/retrocession arrangements, and details of the ten largest unaffiliated counterparty exposures exceeding 10% of statutory capital and surplus in the group return
• The parent board must review its risk management policies and self-determine required capital at least annually and file the resulting insurer-specific solvency self-assessment report with the Authority
• Industry stakeholders may submit comments on the draft Rules to policy@bma.bm by 7th December 2012

Applies to

designated insurers, insurance groups, parent companies of insurance groups

Deadlines

• 7th December 2012: Deadline for industry comments on the draft Amendment Rules, to be sent to policy@bma.bm
• 1 January 2013: Commencement date stated in the draft Amendment Rules

Related documents

• This document amends Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Rules 2011