Stakeholder Letter - Consultation Paper - Proposed recovery planning rules for Bermuda commercial insurance sector (2023-10-25)

Summary

This is a BMA stakeholder letter responding to industry feedback on its May 2023 Consultation Paper on proposed recovery planning Rules for Bermuda's commercial insurance sector. It does not itself enact the Rules, but sets out how the Authority intends to revise several draft provisions in response to comments received.

• Relevant supervisory authority: The definition will be broadened so it is not limited to regulators acting under 'national laws', to capture overseas regulators (including group-wide supervisors) that regulate at state or provincial level.
• Group recovery plans: Where a Bermuda-domiciled insurer is covered by a group-wide recovery plan, the Authority will generally defer to that plan unless it has material concerns the insurer is not sufficiently covered; it will coordinate with the group-wide supervisor if a separate entity-level plan is required.
• Scope criteria (draft section 3(2)): Recovery plan requirement criteria include an insurer with a three-year rolling average of total assets of at least 10 billion dollars or total gross written premiums of at least 5 billion dollars.
• Enhanced supervisory monitoring: The Authority will not adopt a fixed definition of 'enhanced supervisory monitoring' in the Rules, preserving flexibility to consider a range of prudential or conduct issues.
• Implementation trigger (draft section 3(6)): The Authority may require an insurer, insurance group or internationally active insurance group to implement all or part of its recovery plan if it identifies prudential or conduct concerns that could put policyholders, financial stability or Bermuda's reputation at risk.
• Maintaining and updating plans (draft sections 4 to 6): Insurers within scope must maintain an up-to-date recovery plan, review and update it at least every three years or on material change in financial position, strategy, business or risk profile, and submit any updated plan to the Authority within 30 days of it being updated.

These changes are proposed amendments to the draft Rules rather than confirmed final requirements; readers should watch for the finalized Rules to confirm the exact obligations and their commencement date.

Key obligations

• Once finalised, insurers meeting the scope criteria (e.g. three-year rolling average total assets of at least 10 billion dollars or gross written premiums of at least 5 billion dollars) will be required to prepare a recovery plan
• Insurers, insurance groups or internationally active insurance groups within scope must maintain an up-to-date recovery plan
• Recovery plans must be reviewed and updated at least once every three years or upon material change in financial position, strategy, business or risk profile
• An updated recovery plan must be submitted to the Authority within 30 days of being updated
• An insurer, insurance group or internationally active insurance group must implement all or part of its recovery plan if directed by the Authority due to identified prudential or conduct concerns

Applies to

insurers, insurance groups, internationally active insurance groups, Bermuda commercial insurance sector entities

Deadlines

• within 30 days of being updated: An updated recovery plan must be submitted to the Authority within 30 days of being updated
• at least once every three years: Recovery plans should be reviewed and updated at least once every three years, or sooner upon material change in financial position, strategy, business or risk profile