Insurance Group Supervision Statement of Principles (2012-06-12)

Summary

This is a BMA Statement of Principles (June 2012) explaining how the Authority will exercise its discretion and statutory powers as Group Supervisor of insurance groups under Part IVA of the Insurance Act 1978. It does not create new legal duties itself but describes the criteria, processes and safeguards the BMA will apply when deciding to act as group supervisor, gathering information, adjusting capital requirements, and issuing directions to a Designated Insurer.

• Becoming Group Supervisor: The BMA sets out the factors (e.g. whether the group is headed by a specified/Bermuda-incorporated insurer, or directed and managed from Bermuda) it will weigh under section 27B in deciding whether to assume the group supervisor role, and how it defines the scope of the group (including adding or excluding members under sections 27C/27CA).
• Information and document powers: Groups are expected to make mandatory filings under the Act and the Group Rules, and to provide additional information voluntarily; where this is inadequate the BMA may compel production of information, reports or documents from the Designated Insurer under section 29A, or commission independent reports under section 29B.
• Capital adjustment powers: Under section 6D, the BMA may increase or decrease a group's enhanced capital requirement (ECR) and available statutory capital and surplus where the group's risk profile or governance deviates significantly from applicable standards; any such adjustment takes effect only after a notice period of at least 90 days, during which the Designated Insurer and legal entity supervisors may make representations.
• Directions to a Designated Insurer: Under section 32A, the BMA may issue directions to the Designated Insurer to safeguard policyholders or address breaches of the Act or Group Rules, generally following a staged process of discussion, a remedial plan with a target date, and formal notice and decision procedures with rights of representation and appeal.

The document is primarily explanatory of BMA supervisory practice; the substantive obligations it references (mandatory filings, compliance with capital and governance rules, responding to information notices) derive from the Insurance Act and the Insurance (Group Supervision) Rules 2011 and related Prudential Standards Rules, not from this Statement of Principles itself.

Key obligations

• Insurance groups and their Designated Insurer must make the mandatory filings required by the Act and the Group Rules
• When compelled by a notice under section 29A, a Designated Insurer must provide the requested information, reports or documents to the Authority
• A Designated Insurer must cooperate with any professional person's report commissioned by the Authority under section 29B, including providing information via parent, subsidiary or related companies
• A Designated Insurer must respond to and may make representations on notices proposing capital adjustments or directions within the period specified by the Authority
• Where a direction is issued under section 32A, the Designated Insurer must comply with it to safeguard policyholders and address breaches of the Act or Group Rules

Applies to

insurance groups, registered insurers (including reinsurers), Designated Insurers, legal entity supervisors (as counterparties in coordination, not directly regulated by this document)

Deadlines

• not less than 90 days from the date of notification: Any adjustment made by the Authority to a group's ECR or available statutory capital and surplus does not take effect until this period has elapsed, allowing time for representations

Related documents

• This document is made under Insurance Act 1978