Explanatory Memorandum - Insurance (Prudential Standards) (Class 4 Solvency Requirement) Amendment Order 2009 and Insurance Accounts Amendment Regulations 2009

Summary

This is an explanatory memorandum from the Bermuda Monetary Authority describing proposed amendments to the Insurance (Prudential Standards) (Class 4 Solvency Requirement) Order and the Insurance Accounts Regulations, both for 2009. It explains the rationale behind changes arising from the Authority's Disclosure and Transparency consultation and Guidance Note #17 on the Commercial Insurer Risk Assessment, rather than being the amending instrument itself.

• Terminology and filing detail: Clarifies terminology in the existing Order and gives a more detailed description of risk management filing requirements.
• New filing requirements: Adds filing requirements covering governance structure and material intra group transactions to support the Authority's risk assessment of insurers.
• Operational risk charge: Provides more detail on how the operational risk charge in Schedule I is calculated.
• Director and Principal Representative declarations: Proposes requiring two directors and the Principal Representative to declare that the unaudited capital and solvency return is, in all material respects, a fair presentation of the insurer's financial condition.
• Penalty for misleading statements: Proposes making knowingly misleading statements in such declarations a summary offence carrying a fine of fifty thousand dollars under Section 6A(4) of the Insurance Act 1978.
• Derivatives disclosure standardisation: Proposes standardising disclosures in the Accounts Regulations following the 2008 amendment adding a derivatives line item to the statutory balance sheet (Form 1A).

The memorandum describes proposed changes rather than confirming they are already in force; readers should check the final Order and Accounts Regulations text for the enacted provisions and their commencement dates.

Key obligations

• Two directors and the Principal Representative would be required to declare that the capital and solvency return is, in all material respects, a fair presentation of the insurer's financial condition to the best of their knowledge and belief.
• Insurers would face additional filing requirements covering governance structure and material intra group transactions.
• Knowingly making misleading statements in these declarations would become a summary offence liable to a fine of $50,000 under Section 6A(4) of the Insurance Act 1978.

Applies to

Class 4 insurers, commercial insurers, directors, Principal Representative