Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment Rules 2018 (Schedules)

Summary

This document sets out amended prudential reporting schedules (forms) that Class 4 and Class 3B insurers in Bermuda must use to report the assets, liabilities and exposures that feed into their Bermuda Solvency Capital Requirement (BSCR) calculation. It is a technical annex to the Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment Rules 2018, consisting of detailed tabular schedules and accompanying line-by-line instructions rather than narrative obligations.

• Schedule IIB: Fixed income and equity investments classified by BSCR rating, including bonds, mortgage-backed securities, mortgage loans, equity holdings, credit derivatives and counterparty default risk on OTC derivatives.
• Schedule IIC: Funds held by ceding insurers and funds held under retrocession, classified by the same BSCR rating and asset/liability categories as Schedule IIB.
• Schedule IID: Assets and liabilities of segregated account companies, classified by BSCR rating.
• Schedule XXIII (interest rate shock schedules): Interest rate sensitive assets and liabilities by currency, reported under both an interest rate down shock and an interest rate up shock scenario, covering fixed income assets, deposits, loans, reinsurance receivables and derivatives.
• Rating methodology: Insurers must use the latest AM Best, S&P, Moody's or Fitch ratings mapped to an 8-point BSCR rating scale, use the most conservative rating where agencies differ, and assign unrated securities a BSCR rating of 8.

The schedules operationalise how affected insurers must categorise and disclose investment, reinsurance funding, segregated account, derivative and currency exposures for solvency reporting purposes, applying detailed classification rules (e.g. sovereign debt treatment, look-through approach for funds, strategic holdings classification) prescribed by the Bermuda Monetary Authority.

Key obligations

• Class 4 and Class 3B insurers must complete Schedule IIB reporting fixed income and equity investments classified by BSCR rating as at the reporting date.
• Class 4 and Class 3B insurers must complete Schedule IIC reporting funds held by ceding insurers and funds held under retrocession classified by BSCR rating.
• Class 4 and Class 3B insurers must complete Schedule IID reporting segregated account company assets and liabilities classified by BSCR rating.
• Insurers must complete Schedule XXIII reporting interest rate sensitive assets and liabilities by currency under both interest rate down shock and up shock scenarios.
• Insurers must classify fixed income securities and preferred stocks using the latest AM Best, S&P, Moody's or Fitch ratings mapped to the prescribed 8-point BSCR rating scale.
• Where a security receives different ratings from different agencies, insurers must apply the most conservative rating.
• Insurers must assign a BSCR rating of 8 to unrated securities.
• Insurers must classify sovereign debt issued in a country's own currency rated AA- or better as BSCR rating 0, with other sovereign bonds classified like corporate bonds.
• Insurers must apply the look-through approach prescribed by the Authority for collective investment vehicles and other fund-packaged investments when determining exposures.

Applies to

Class 4 insurers, Class 3B insurers