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

Summary

This document sets out the detailed reporting schedules (Schedules IIB, IIC, IID, and XXIII, among others) that form part of the Insurance (Prudential Standards) (Class 3A Solvency Requirement) Rules, as amended in 2018. It prescribes the templates and instructions Class 3A insurers must use to report investments, derivatives, funds held by ceding insurers, segregated account company assets, and interest rate sensitive exposures for the Bermuda Solvency Capital Requirement (BSCR) calculation.

• Fixed income and equity investment reporting (Schedule IIB): Insurers must categorize quoted and unquoted bonds, mortgage-backed securities, bond mutual funds and mortgage loans, and classify equity holdings (strategic holdings, listed securities, preferred stocks, derivatives, infrastructure, real estate) by BSCR rating and exposure type.
• Funds held under reinsurance/retrocession (Schedule IIC): Ceding insurers must report funds held by ceding reinsurers and funds held under retrocession, broken down by the same fixed income, equity, and credit derivative categories and BSCR ratings.
• Segregated account company assets and liabilities (Schedule IID): Insurers with segregated accounts must report the assets and liabilities of those accounts by BSCR rating using the same classification framework.
• Interest rate shock exposures (Schedule XXIII): Insurers must report all interest rate sensitive assets and liabilities (by currency, before/after shock, with and without management actions) for both interest rate up and down shock scenarios.
• BSCR rating methodology: Ratings must use the latest available AM Best, S&P, Moody's or Fitch rating; where ratings differ, the most conservative rating applies; unrated securities are assigned BSCR rating 8; specific rules apply to sovereign and government-guaranteed debt.
• Look-through approach: Insurers must apply a look-through approach, in accordance with criteria prescribed by the Authority, to collective investment vehicles and other fund-packaged investments when determining exposures.

These schedules are technical reporting forms and accompanying instructions rather than standalone obligations creating new solvency thresholds; they operationalize how Class 3A insurers must compile and classify data for BSCR filings under the Authority's prudential rules.

Key obligations

• Class 3A insurers must classify fixed income investments (bonds, mortgage-backed securities, bond mutual funds, mortgage loans) by BSCR rating using Schedule IIB.
• Class 3A insurers must classify equity investments into categories such as strategic holdings, listed securities, preferred stocks, derivatives, infrastructure and real estate, distinguishing long and short exposures.
• Insurers must use the latest available AM Best, S&P, Moody's or Fitch rating to determine BSCR ratings for fixed income securities and preferred stocks, applying the most conservative rating where agencies differ.
• Unrated securities must be assigned a BSCR rating of 8.
• Sovereign debt issued in a country's own currency rated AA- or better must be classified as BSCR rating 0; other sovereign bonds must be classified like corporate bonds.
• Debt issued or guaranteed by government entities (excluding government mortgage-backed securities) must be assigned BSCR rating 0.
• Ceding insurers must report funds held by ceding reinsurers and funds held under retrocession using Schedule IIC, applying the same classification rules.
• Insurers with segregated accounts must report segregated account company assets and liabilities by BSCR rating using Schedule IID.
• Insurers must report all interest rate sensitive assets and liabilities, by currency and shock scenario (up and down), using Schedule XXIII.
• Insurers must apply a look-through approach for collective investment vehicles and fund-packaged investments in accordance with criteria prescribed by the Authority.

Applies to

Class 3A insurers, ceding insurers, insurers with segregated account companies