Insurance (Prudential Standards) (Class 3A Solvency Requirement) Amendment (No. 2) Rules 2019

Summary

This instrument amends the Insurance Prudential Standards Class 3A Solvency Requirement Rules by updating the Bermuda Solvency Capital Requirement (BSCR) rating provisions across several schedules. It replaces fixed, in-rule credit rating agency schedules and tables with a requirement that insurers use a list of approved credit rating agencies prescribed separately by the Bermuda Monetary Authority (BMA) and published on its website.

• Schedules II, IIA to IIF: Paragraphs on credit rating agencies are revoked and replaced so that the applicable list of rating agencies and how their ratings are applied to fixed income securities or preferred stock is prescribed by the Authority, and the embedded BSCR Ratings Schedule is deleted from the rules.
• Schedule XVIII: The BSCR Ratings Chart following paragraph (a)(ix)(E) is deleted.
• Schedules XIX and XIXA: Provisions on short-term credit ratings for cash and cash equivalent balances are revoked and replaced to refer to an Authority-prescribed list of agencies (with an option for the Authority to prescribe long-term ratings instead), and the accompanying BSCR Ratings Table is deleted.
• Publication of schedules: The schedules referenced in these amendments are omitted from the Rules themselves and instead published separately on the BMA website under section 6A(8) of the Insurance Act 1978.

The amendments take effect on 1 January 2020 but apply retroactively in effect to financial years commencing on or after 1 January 2019, meaning affected insurers must apply the new rating agency framework for that reporting period onward.

Key obligations

• Insurers within scope of the amended Schedules (II, IIA-IIF, XVIII, XIX, XIXA) must use the list of credit rating agencies prescribed by the BMA, rather than any list previously set out in the Rules, when determining BSCR ratings for fixed income securities, preferred stock, and cash and cash equivalent balances.
• Insurers must apply these updated BSCR rating provisions to financial years commencing on or after 1 January 2019, even though the Rules formally commence on 1 January 2020.

Applies to

Class 3A insurers, insurers subject to the Bermuda Solvency Capital Requirement (BSCR) schedules amended by this instrument

Deadlines

• 1 January 2020: Date these Amendment Rules come into operation.
• financial years commencing on or after 1 January 2019: Period to which the amended BSCR credit rating agency provisions apply.

Related documents

• This document is made under Insurance Act 1978