Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment (No. 2) Rules 2015

Summary

This BMA rule amends the Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Rules to change how certain insurers calculate their Bermuda Solvency Capital Requirement (BSCR) and what group and governance information they must disclose. It inserts two new schedules dealing with non-insurance financial affiliates and minimum margin of solvency, and expands disclosure requirements around governance, group structure and segregated accounts.

• New capital charge: Adds a regulatory capital requirement component (in Schedule I, paragraph 12) for regulated non-insurance financial operating entities in which the insurer has control or significant influence, calculated as the insurer's proportionate share of each entity's regulatory capital requirement under the relevant jurisdiction's solvency laws.
• Updated capital charge factors: Revises the Table 2 capital charge factors for investments in affiliates (unregulated ancillary services, unregulated non-financial and financial operating entities, and regulated insurance financial operating entities).
• Expanded Schedule V disclosures: Requires detailed disclosure of board and management structure, terms of reference, jurisdictions of key decision-making, service providers, group financial position, largest reinsurers, and a group organizational chart.
• Segregated account disclosures: Adds a new requirement to disclose details of segregated accounts, including lines of business written, gross and net premiums written, and financial details of each segregated account cell (including deficits, insolvency or litigation).
• New Schedule XVI: Schedule of Regulated Non-Insurance Financial Operating Entities, requiring entity-level data (jurisdiction, sector, entity type, products/services, participation percentage, assets, investment amount, regulatory capital requirement and the insurer's applicable share).
• New Schedule XVII: Schedule of Minimum Margin of Solvency, requiring data on affiliate entities (jurisdiction, entity type, participation interest, net premiums written, total and net assets, and minimum margin of solvency) over which the insurer has control or significant influence.

The amendments took effect on 1 January 2016 and apply to financial years commencing on or after that date, meaning affected insurers needed to incorporate the new calculations and disclosures into filings for financial years starting from that date.

Key obligations

• Insurers must calculate and include in their BSCR a regulatory capital requirement for regulated non-insurance financial operating entities, equal to their proportionate share of each such entity's regulatory capital requirement under the applicable jurisdiction's solvency laws (new Schedule XVI).
• Insurers must complete Schedule XVI providing entity name, jurisdiction, sector classification, strategic purpose, entity type, products/services, participation percentage, total assets, investment amount, and applicable share of regulatory capital requirement for each regulated non-insurance financial operating entity.
• Insurers must complete new Schedule XVII (Schedule of Minimum Margin of Solvency) providing details of affiliates over which they exercise control or significant influence, including jurisdiction, entity type, participation interest, net premiums written, total and net assets, and minimum margin of solvency.
• Insurers must disclose expanded governance and group structure information under Schedule V, including board and management structure, terms of reference, jurisdictions of key decision-making, service provider details, group financial position, and details of major reinsurers.
• Insurers must disclose details of segregated accounts, including segregated account cell financials, lines of business, premiums written, inter-relationships between cells, and any deficit, insolvency or litigation affecting a cell.

Applies to

Class 4 insurers, Class 3B insurers

Deadlines

• 1 January 2016: Commencement date of these Rules.
• financial years commencing on or after 1 January 2016: Period from which the amended solvency calculation and disclosure requirements apply.

Related documents

• This document is made under Insurance Act 1978