Insurance (Prudential Standards)(Class 4 and Class 3B Solvency Requirement) Amendment Rule 2011

Summary

This is a Bermuda Monetary Authority rule amending the Insurance (Prudential Standards)(Class 4 and Class 3B Solvency Requirement) Rules 2008. It came into operation on 31 December 2011 and introduces new definitions, a new quarterly financial reporting requirement for certain insurers, and revisions to several solvency-related schedules (capital calculation tables and risk management/CISSA disclosure forms).

• New definitions: Adds definitions of material intra-group transaction (a transaction reducing available capital and surplus by 5% or more, or a linked series reducing it by 10% or more, or one with high qualitative risk) and underwriting risk (premium, reserve and catastrophe risk).
• ECR model trigger: Amends paragraph 5(6) so the enhanced capital requirement (ECR) determination method can also be revisited where the Authority deems an approved internal capital model no longer appropriate.
• New quarterly financial return: Inserts new paragraph 6AB requiring every insurer that is a member of a group for which the Authority is not the group wide supervisor to prepare and file quarterly financial returns, including unaudited financial statements, details of material intra-group transactions, intra-group reinsurance/retrocession exposures, and the insurer's ten largest counterparty exposures.
• Schedule I (BSCR) change: Amends Table 3 (interest rate adjustment for bonds) in the Bermuda Solvency Capital Requirement schedule, replacing '120' with '200' and '1.2%' with '2.0%'.
• Schedule V (Risk Management) changes: Expands the risk management schedule and instructions to require disclosure of exposure territories, jurisdictions where the group's board/management/internal controls reside, group financial position and largest insurers by asset/reserve/capital value, material intra-group transaction and reinsurance exposure details, and retention of supporting documentation for probable maximum loss models for Authority inspection on request.
• Schedule VII (CISSA) changes: Replaces the CISSA Capital Summary table (Table 8) with an expanded risk-category breakdown comparing CISSA capital and regulatory capital, and adds additional questions on reasons for the target CISSA amount, aggregation methodology, capital contingency plans, intra-group support arrangements, and double/multiple gearing.

The amendments increase the volume and granularity of group and intra-group risk information Class 4 and Class 3B insurers must disclose to the BMA, and impose a new recurring quarterly filing obligation on insurers within groups not supervised on a group-wide basis by the Authority.

Key obligations

• Every insurer that is a member of a group for which the Authority is not the group wide supervisor must prepare and file a quarterly financial return, comprising quarterly unaudited financial statements (balance sheet and income statement, no more than two months old), details of material intra-group transactions, intra-group reinsurance/retrocession and other material intra-group exposures, and its ten largest counterparty exposures (and any exceeding 10% of statutory capital and surplus).
• Quarterly financial returns must be filed on or before the last day of every third month beginning three months after the insurer's filing date.
• Insurers must retain support documentation used to derive gross and net probable maximum loss and make it available to the Authority upon request.
• Insurers must provide expanded Schedule V risk management disclosures, including exposure territories, jurisdictions of board/management/internal controls, group financial position, and largest group insurers by asset, reserve and capital value.
• Insurers must complete the revised Schedule VII CISSA Capital Summary and additional information questions on capital adequacy, contingency funding plans, intra-group support arrangements, and gearing.

Applies to

Class 4 insurers, Class 3B insurers

Deadlines

• 31 December 2011: Commencement date of the Amendment Rule 2011.
• on or before the last day of every third month beginning three months after its filing date: Deadline for filing the new quarterly financial return required under paragraph 6AB for insurers in groups not group-wide supervised by the BMA.

Related documents

• This document is made under Insurance Act 1978
• This document amends Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Rules 2008 (BR 83/2008)