Notice - Insurance (Prudential Standards)(Insurance Group Solvency Requirement) Rules 2011 (2011-11-25)

Summary

This is a Bermuda Monetary Authority (BMA) notice announcing the Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Rules 2011, which prescribe how the Bermuda Solvency Capital Requirement (BSCR) is calculated for insurance groups for which BMA is the appointed group-wide supervisor, along with related annual and quarterly solvency filing requirements. The Rules take effect on 31 December 2011, except for the paragraph imposing the duty to comply with the enhanced capital requirement (ECR), which takes effect on 1 January 2013.

• Definitions updated: Rule 2 adds definitions for double or multiple gearing, material intra-group transaction and variable annuity guarantees, and amends the definition of stop loss insurance risk.
• ECR calculation amended: Rule 3 is amended to reflect the calculation of available statutory capital and surplus used in determining the enhanced capital requirement.
• Group capital and solvency return schedules revised: Rule 6 and Schedule 1 are amended, including changes to Schedule IV(A) (premiums by line of business), a new Schedule IV(B) for long-term business premiums, additions to Schedule V (risk management), changes to Schedule IX (group solvency self-assessment), Schedule X (catastrophe return), renaming of Schedule XI(C), Schedule XII (minimum margin of solvency) and Schedule XIII (eligible capital).
• Declaration signatories changed: Rule 7 now requires the group capital and solvency return declaration to be signed by one director, the chief executive and the chief risk officer, instead of two directors and the chief executive.
• Quarterly return dates changed: Rule 9 amends quarterly financial return submission dates to on or before the last day of May, August and November each year.

The notice invited final comments on the revised Rules to be submitted to BMA by 13 December 2011, and noted the Rules remained subject to final legislative review by the Attorney General's Chambers.

Key obligations

• Every insurance group must maintain available statutory capital and surplus equal to or exceeding its enhanced capital requirement (ECR), calculated at the end of its relevant year, once paragraph 3 takes effect on 1 January 2013.
• A designated insurer must furnish the Authority with an insurance group capital and solvency return, comprising both electronic and printed versions of the Group BSCR model and Schedules II through XIII, on or before its filing date.
• A designated insurer must keep a copy of the group's capital and solvency return at its principal office for five years from the filing date and produce it to the Authority on direction.
• Every group capital and solvency return must be accompanied by a declaration signed by one director, the chief executive and the chief risk officer of the parent company attesting that the return fairly represents the group's financial condition.
• Every insurance group must prepare and file quarterly financial returns, including intra-group transaction and risk concentration details, on or before the last day of May, August and November each year.
• A designated insurer seeking to use an internal capital model instead of the Group BSCR model must apply to the Authority for approval and may make written representations within 28 days of a notice of non-approval or proposed revocation.
• Persons must not knowingly or recklessly make false or misleading statements or returns to the Authority, on pain of a summary offence with a fine of up to $50,000.

Applies to

insurance groups, designated insurers, parent companies of insurance groups

Deadlines

• 31 December 2011: Rules come into operation (except paragraph 3).
• 1 January 2013: Paragraph 3 (duty to comply with the enhanced capital requirement) comes into effect.
• 13 December 2011: Deadline for submitting final comments on the revised Rules to policy@bma.bm.
• last day of May, August and November annually: Quarterly financial returns must be filed with the Authority.
• filing date (as defined in the Group Rules): Deadline by which a designated insurer must furnish the annual insurance group capital and solvency return.
• 28 days from date of notice: Period within which a designated insurer may make written representations after being notified of non-approval or proposed revocation of an internal capital model.