Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment Rules 2012

Summary

This is a draft notice and accompanying draft rules from the Bermuda Monetary Authority proposing amendments to the Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Rules 2008. It clarifies defined terms, revises the quarterly intra-group reporting requirement, and replaces four schedules to align reporting with the 2011 year-end BSCR model and related statutory forms.

• Defined terms: Adds definitions of "group", "unaffiliated" and "materialised" for interpreting the Rules.
• Quarterly financial return (paragraph 6AB): Clarifies that non-group-supervised insurers must report intra-group transactions and exposures only where they have materialised since the last annual or quarterly filing, with consequential changes to Schedule V and its instructions.
• Schedule replacements: Schedules VII, VIII, IX and X are repealed and replaced with new Schedule IX (CISSA), Schedule X (Catastrophe Risk Return), Schedule XI (Loss Triangles/Net Loss Reserve Reconciliation) and Schedule XII (Eligible Capital), aligning them with the 2011 BSCR model, Form 1A, Form 8 and the Eligible Capital Rules.
• Proposed effective date: The amendment rules, once finalised, are proposed to come into operation on 1 January 2013.

As drafted, the notice sought industry comment before finalisation; readers should check the BMA source for whether and in what form the rules were ultimately made, since this document reflects a proposal stage rather than a finalised, binding instrument.

Key obligations

• Insurers not part of a group for which the BMA is group supervisor must prepare and file quarterly financial returns by the last day of May, August and November each year.
• Quarterly returns must include unaudited quarterly financial statements (balance sheet and income statement) reflecting a financial position no older than two months.
• Quarterly returns must disclose materialised intra-group transactions and exposures (since the last quarterly or annual filing), including exposure values, counterparties, transaction details, duration and performance triggers.
• Quarterly returns must disclose materialised intra-group reinsurance, retrocession and other risk transfer arrangements, including aggregated exposure limits and premium flows by counterparty.
• Quarterly returns must disclose the insurer's ten largest unaffiliated counterparty exposures and any unaffiliated exposures exceeding 10% of statutory capital and surplus.
• Insurers must file a CISSA insurer-specific report (Schedule IX) describing their business, strategy and solvency self-assessment, approved and signed by two board members.
• Insurers must complete the new Catastrophe Risk Return (Schedule X), Loss Triangles/Net Loss Reserve reconciliation (Schedule XI) and Schedule of Eligible Capital (Schedule XII) in the prescribed formats.
• Interested parties were invited to submit comments on the draft Rules to policy@bma.bm by 15 August 2012.

Applies to

Class 4 insurers, Class 3B insurers

Deadlines

• 15th August 2012: Deadline for submitting comments on the draft Rules to policy@bma.bm.
• 1st January 2013: Proposed date on which the amendment Rules would come into operation.
• last day of May, August and November of every year: Proposed deadline for filing quarterly financial returns under revised paragraph 6AB.

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)