Insurance (Prudential Standards) (Class 3A Solvency Requirement) Rules 2011

Summary

These Rules, made by the Bermuda Monetary Authority under the Insurance Act 1978, set the solvency requirement for Class 3A insurers. They establish the Enhanced Capital Requirement (ECR) calculation methodology, based on the Bermuda Solvency Capital Requirement for Small/Medium-sized Entities (BSCR-SME) model or an approved internal capital model, and require insurers to hold statutory capital and surplus at or above that level.

• ECR calculation: Every Class 3A insurer must calculate its ECR at the end of each relevant (financial) year using either the BSCR-SME model or an approved internal capital model, with the ECR never falling below the statutory minimum margin of solvency.
• Capital maintenance: Class 3A insurers must maintain available statutory capital and surplus equal to or exceeding the ECR.
• Phase-in period: The ECR is phased in over three years: 50% of the Schedule I amount for the financial year ending 2011, 75% for 2012, and the full amount from 2013 onward.
• Internal model approval: Insurers may apply to the Authority to use an approved internal capital model instead of the BSCR-SME model; the Authority may approve (with conditions), refuse, or later revoke approval, and must give written notice of its decisions.
• Representations: An insurer given notice of refusal or proposed revocation of an internal model approval may make written representations to the Authority within 28 days of the notice.
• Capital and solvency return: Every Class 3A insurer must file a capital and solvency return (electronic and printed BSCR-SME model output plus prescribed Schedules, and any approved internal model printout) with the Authority on or before its filing date.
• Recordkeeping: Insurers must retain a copy of each capital and solvency return at their principal office for five years from the filing date and produce it to the Authority on request by a specified date.

The Rules also set out detailed formulas and capital charge factors (Schedules I to X) for calculating fixed income, equity, interest rate/liquidity, premium, reserve, credit and catastrophe risk charges, and prescribe the reporting tables (including eligible capital tiers) insurers must complete as part of their return.

Key obligations

• Every Class 3A insurer must calculate its ECR at the end of each relevant year using the BSCR-SME model or an approved internal capital model, subject to the statutory minimum margin of solvency.
• Every Class 3A insurer must maintain available statutory capital and surplus equal to or exceeding its ECR.
• During the phase-in period, insurers must meet only the specified percentage of the full ECR: 50% for the financial year ending 2011, 75% for 2012, and 100% from 2013 onward.
• An insurer seeking to use an internal capital model instead of the BSCR-SME model must apply to the Authority for approval, addressing the model's appropriateness, integration into risk management, and control framework.
• An insurer receiving notice of refusal or proposed revocation of internal model approval may submit written representations to the Authority within 28 days of the notice.
• Every Class 3A insurer must furnish the Authority with a capital and solvency return (comprising the BSCR-SME model output, prescribed Schedules, and any approved internal model output) on or before its filing date.
• Every Class 3A insurer must retain a copy of its capital and solvency return at its principal office for five years from the filing date and produce it to the Authority if directed.

Applies to

Class 3A insurers

Deadlines

• 31st day of December 2011: Commencement date of these Rules.
• financial year ending in 2011: Applicable ECR is 50% of the amount determined by Schedule I.
• financial year ending in 2012: Applicable ECR is 75% of the amount determined by Schedule I.
• financial year ending in 2013 and beyond: Applicable ECR is the full amount determined by Schedule I.
• 28 days from the date of the notice: Period within which an insurer may make written representations to the Authority after notice of refusal or proposed revocation of an approved internal capital model.
• on or before its filing date: Deadline for a Class 3A insurer to furnish the Authority with its capital and solvency return (filing date as defined in section 17(4) of the Insurance Act 1978).
• five years beginning with its filing date: Period for which an insurer must retain a copy of its capital and solvency return at its principal office.

Related documents

• This document is made under Insurance Act 1978
• Insurance (Prudential Standards) (Class 3A Solvency Requirement) Amendment Rules 2024 amends this document
• Insurance (Prudential Standards) (Class 3A Solvency Requirement) Amendment (No. 2) Rules 2022 amends this document
• Insurance (Prudential Standards) (Class 3A Solvency Requirement) Amendment Rules 2022 (BR 38/2022) amends this document
• Insurance (Prudential Standards) (Class 3A Solvency Requirement) Amendment Rules 2018 (BR 67 / 2018) amends this document
• Insurance (Prudential Standards) (Class 3A Solvency Requirements) Amendment Rules 2022 amends this document
• Notice - Insurance (Prudential Standards) (Class 3A Solvency Requirement) Amendment Rules 2012 (2012-11-14) amends this document
• Notice - Insurance (Prudential Standards) (Class 3A Solvency Requirement) Amendment Rules 2012 (2012-06-19) amends this document
• Notice - Insurance (Prudential Standards) (Class 3A Solvency Requirement) Amendment Rules 2013 (2013-07-01) amends this document