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

Summary

This is a BMA notice accompanying draft Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Rules 2011, which set out how the Bermuda Solvency Capital Requirement (BSCR) is calculated for insurance groups for which the BMA acts as group-wide supervisor, along with related annual and quarterly solvency filing requirements. The notice explains that the Rules were updated following a year of group pilot projects and invites final comments before finalisation.

• Effective dates: The Rules are intended to take effect on 31 December 2011, except paragraph 3 (duty to comply with the enhanced capital requirement/ECR), which takes effect on 1 January 2013.
• Definitions updated: Rule 2 adds/amends definitions including double or multiple gearing, material intra-group transaction, variable annuity guarantees and 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 (ECR).
• Group return schedules amended: Rule 6 and Schedule 1 are amended, adding/updating Schedules IV(A), IV(B) (long-term business premiums), V (risk management detail), IX (group solvency self-assessment), X (catastrophe return), XI(C) (unregulated entities), XII (minimum margin of solvency) and XIII (group eligible capital).
• Declaration signatories changed: Rule 7 changes the required signatories on the group capital and solvency return declaration from two directors and the chief executive to one director, the chief executive and the chief risk officer.
• Quarterly return timing changed: Rule 9 amends quarterly financial return submission dates to on or before the last day of May, August and November.

Once in force, the Rules require every insurance group within scope to calculate its ECR using the Group BSCR model or an approved internal capital model, maintain capital and surplus at or above that ECR, and file an annual group capital and solvency return and quarterly financial returns with the BMA. Knowingly or recklessly submitting a false or misleading statement is a summary offence carrying a fine of up to $50,000. The BMA asked that any final comments on the revised draft Rules be submitted to policy@bma.bm by Tuesday, 13 December 2011, noting the Rules remained subject to final legislative review by the Attorney General's Chambers.

Key obligations

• Every insurance group within the BMA's group-wide supervision must calculate its Enhanced Capital Requirement (ECR) using the Group BSCR model or an approved group internal capital model, and maintain available statutory capital and surplus equal to or exceeding the ECR.
• A designated insurer must furnish the Authority with an insurance group capital and solvency return (comprising the Group BSCR model and Schedules II-XIII, in both electronic and printed form) on or before the group's filing date.
• A designated insurer must keep a copy of the insurance group's capital and solvency return at its principal office for five years from the filing date and produce it to the Authority on request.
• 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.
• Every insurance group must prepare and file quarterly financial returns on or before the last day of May, August and November each year, including quarterly unaudited consolidated group financial statements and details of material intra-group transactions.
• A designated insurer served notice of a decision not to approve, or a proposal to revoke approval of, a group internal capital model may make written representations to the Authority within 28 days of the notice.
• Knowingly or recklessly making a false or misleading statement or return to the Authority is a summary offence punishable by a fine of up to $50,000.
• Interested parties should submit any final comments on the revised draft Rules to policy@bma.bm by Tuesday, 13 December 2011.

Applies to

insurance groups, designated insurers, parent companies of insurance groups

Deadlines

• Tuesday, 13th December 2011: Deadline for submitting final comments on the revised draft Rules to policy@bma.bm.
• 31 December 2011: Intended commencement date for the Rules generally.
• 1 January 2013: Commencement date for paragraph 3 (duty to comply with the enhanced capital requirement).
• last day of May, August and November each year: Deadline for filing quarterly financial returns under Rule 9.
• 28 days from the date of notice: Period within which a designated insurer may make written representations after being notified of a decision not to approve, or a proposal to revoke approval of, a group internal capital model.