Insurance (Prudential Standards) (Class 3A Solvency Requirement) Amendment Rules 2018 (Schedules)

Summary

This document sets out amended statutory reporting schedules (Schedules IIB, IIC, IID and others, including Schedule XXIII) that Class 3A insurers must use when completing their Bermuda Solvency Capital Requirement (BSCR) return. The schedules require insurers to break down fixed income, equity, credit derivative, funds-held and interest-rate-sensitive asset and liability positions by BSCR rating category, and set out detailed instructions on how each category must be classified and rated for solvency calculation purposes.

• Schedule IIB: Requires a schedule of fixed income and equity investments classified by BSCR rating, including bonds, mortgage-backed securities, mortgage loans, preferred stocks, strategic and other equity holdings, credit derivatives and counterparty default risk exposures.
• Schedule IIC: Requires reporting of funds held by ceding insurers and funds held under retrocession, using the same BSCR rating classification methodology as Schedule IIB.
• Schedule IID: Requires reporting of segregated account companies' assets and liabilities by BSCR rating.
• Schedule XXIII: Requires reporting of interest rate sensitive assets and liabilities by currency under interest rate up-shock and down-shock scenarios, covering fixed income assets, deposits, loans, reinsurance balances, derivatives and funds held by ceding insurers or under retrocession.
• Classification rules: Insurers must use the latest AM Best, S&P, Moody's or Fitch ratings, apply the most conservative rating where agencies differ, assign a BSCR rating of 8 to unrated securities, classify certain sovereign and government-guaranteed debt as BSCR rating 0, and apply a 'look-through' approach for collective investment vehicles and fund-packaged investments in accordance with criteria prescribed by the Authority.

The document is technical and forms part of the prescribed BSCR reporting forms; it does not contain narrative provisions on scope, commencement or penalties beyond the schedules and their accompanying instructions.

Key obligations

• Class 3A insurers must complete Schedules IIB, IIC, IID and XXIII (and related schedules) as part of their BSCR statutory financial return, classifying fixed income and equity investments by BSCR rating.
• Insurers must use the latest available AM Best, S&P, Moody's or Fitch rating to determine the BSCR rating of a fixed income security or preferred stock, using the most conservative rating where agencies disagree.
• Insurers must assign a BSCR rating of 8 to any unrated security.
• Insurers must classify sovereign debt issued in the issuer's own currency and rated AA- or better as BSCR rating 0, and government-guaranteed debt (other than certain mortgage-backed securities) as BSCR rating 0.
• Insurers must apply the 'look-through' approach, per criteria prescribed by the Authority, when determining exposures for collective investment vehicles and fund-packaged investments.
• Insurers must report interest rate sensitive assets and liabilities by currency under both interest rate up-shock and down-shock scenarios per Schedule XXIII.

Applies to

Class 3A insurers