Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment (No. 2) Rules 2019

Summary

This instrument amends the Bermuda Monetary Authority's Prudential Standards Rules that set the Bermuda Solvency Capital Requirement (BSCR) framework for Class 4 and Class 3B insurers. It changes how credit ratings are used in the BSCR calculation, replacing embedded ratings schedules/tables with a requirement that insurers use a list of credit rating agencies and rating methodologies prescribed separately by the Authority.

• Credit rating agency lists: Schedules II, IIA, IIB, IIC, IID, IIE and IIF are amended so that the list of approved credit rating agencies and how their ratings must be applied to fixed income securities and preferred stock will be prescribed by the Authority, rather than fixed in the Rules.
• Removal of embedded ratings tools: The BSCR Ratings Schedule in Schedule II and IIA, and related ratings schedules/charts/tables in Schedule IIB through IIF, XVIII, XIX and XIXA, are deleted from the Rules.
• Cash and cash equivalents: Schedules XIX and XIXA are amended so that short term (and alternately long term) credit ratings used for cash and cash equivalent balances will also be prescribed by the Authority.
• Publication of schedules: The amended schedules themselves are omitted from the printed Rules and instead published separately on the Authority's website under section 6A(8) of the Insurance Act 1978.

The amendments take effect on 1 January 2020 but apply retroactively to financial years commencing on or after 1 January 2019, meaning affected insurers must apply the new Authority-prescribed rating methodology when calculating their BSCR for those financial years.

Key obligations

• Class 4 and Class 3B insurers must apply the list of credit rating agencies and rating application methodology prescribed by the Authority (rather than the previously embedded schedules) when determining BSCR ratings for fixed income securities and preferred stock.
• Insurers using Schedules XIX and XIXA must apply the Authority-prescribed short term (or alternate long term) credit ratings when determining BSCR ratings for cash and cash equivalent balances.
• Insurers must apply these amended BSCR rating rules for financial years commencing on or after 1 January 2019.

Applies to

Class 4 insurers, Class 3B insurers, insurers subject to Schedules IIA to IIF, XVIII, XIX and XIXA

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 solvency requirement rules apply.

Related documents

• This document is made under Insurance Act 1978