Report to Industry - Consultation Paper on the Enhanced Reporting Requirements for Limited Purpose Insurers (2012-05-28)

Summary

This is a Report to Industry issued by the Bermuda Monetary Authority responding to comments received on its earlier consultation paper on enhanced reporting requirements for Limited Purpose Insurers. It does not itself impose final rules but explains how the Authority intends to modify or clarify the proposed enhanced return in light of industry feedback, ahead of formal implementation.

• Own risk assessment: Directors must annually confirm their understanding of the insurer's risk profile; a phased rollout is planned, with Class 3 insurers required to comply first once the electronic platform is operational, followed by Class 1, Class 2, Class A, Class B and Special Purpose Insurers the following year.
• Quantitative analysis: No detailed quantitative analysis is mandated in the Return itself, but insurers are still expected to maintain internal policies to assess risk and capital adequacy, potentially above the Minimum Solvency Margin.
• Geographic underwriting breakdown: Insurers must report underwriting income by geographic origin, but may report genuinely global programmes as global rather than splitting them by region.
• Collateral analysis: Insurers must report in force collateral by line of business, or in aggregate where arrangements cannot be segregated, covering both direct and reinsurance business.
• Capital calls: Insurers must disclose all capital call arrangements (approved and unapproved), including non-binding parental letters of support, which require Authority approval to qualify.
• Statutory Return Declaration: Wording will be revised so Directors and the Principal Representative declare solvency confirmations only to the best of their knowledge and belief at time of signing.
• Permit companies: Permit companies with modified Section 56 filing directions may continue filing in their home jurisdiction, but must provide written confirmation that similar reporting requirements exist there, or may otherwise be required to comply with the enhanced return on a proportional basis.
• Signatures and filing format: Insurers must print, sign and scan the statutory return declaration and attach it to the electronic return via the index page attachment icon.
• Trial run and platform: A trial run will precede formal implementation, and insurers will not be required to comply with enhanced reporting until the electronic platform is operational; timing will be communicated separately.

The Authority also confirms schedules will link automatically to statutory financial statement line items to avoid duplicate data entry, and states that formal guidance notes will be issued before the enhanced return is implemented.

Key obligations

• Directors of limited purpose insurers must complete an annual own risk assessment confirming their understanding of the insurer's risk profile
• Insurers must report underwriting income by geographic origin, except that genuinely global programmes may be reported as global
• Insurers must disclose in-force collateral arrangements by line of business or in aggregate, covering direct and reinsurance business
• Insurers must disclose all capital call arrangements, including any non-binding parental letters of support, which require Authority approval
• Two Directors and the Principal Representative must sign the Statutory Return Declaration, confirming solvency to the best of their knowledge and belief at time of signing
• Insurers must print, sign, scan and attach the statutory return declaration to the electronic return
• Permit companies with modified Section 56 filing directions must provide written confirmation of equivalent reporting requirements in their home jurisdiction or may be required to comply with enhanced reporting on a proportional basis
• Class 3 insurers must be the first class required to comply with the enhanced reporting requirements once the electronic platform is operational, with other classes following the next year

Applies to

Limited Purpose Insurers, Class 1 insurers, Class 2 insurers, Class 3 insurers, Class A insurers, Class B insurers, Special Purpose Insurers, Permit companies

Deadlines

• once the electronic reporting platform is operational: Class 3 insurers must be the first required to comply with the enhanced reporting requirements, with Class 1, Class 2, Class A, Class B and Special Purpose Insurers required to comply the following year
• prior to formal implementation: The Authority will conduct a trial run of the enhanced reporting requirements before formal implementation, with timing to be communicated once the consultation process concludes