Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Rules 2008 (BR 83/2008)

Summary

These Rules, made by the Bermuda Monetary Authority under the Insurance Act 1978, set out the solvency and capital reporting framework for Class 4 and Class 3B insurers. They establish the Enhanced Capital Requirement (ECR), the Bermuda Solvency Capital Requirement (BSCR) model, and the process for using an approved internal capital model, along with the capital and solvency return and quarterly financial return regimes.

• ECR calculation: Each insurer must calculate its ECR at the end of every relevant (financial) year using the BSCR model or an approved internal capital model, and the ECR must at all times equal or exceed the statutory margin of solvency.
• Minimum capital and surplus: Every Class 3B or Class 4 insurer must maintain available statutory economic capital and surplus equal to or exceeding its ECR.
• Internal capital model approval: Insurers wishing to use an internal model instead of the BSCR model must apply to the Authority for approval; the Authority can approve with conditions, refuse, or later revoke approval, subject to a 28 day representation period for the insurer.
• Capital and solvency return: Insurers must file a capital and solvency return (electronic BSCR model plus prescribed schedules) with the Authority on or before their filing date, accompanied by a loss reserve specialist's opinion and a declaration signed by two directors and either the CRO or CFO.
• Record keeping: A copy of each capital and solvency return must be retained at the insurer's principal office for five years from its filing date and produced to the Authority on request.
• Quarterly financial returns: Insurers that are not part of a group for which the Authority is group supervisor must file quarterly unaudited financial statements and details of material intra-group transactions, reinsurance/retrocession arrangements and large unaffiliated exposures by the last day of May, August and November each year, unless exempted or modified by the Authority under section 6C.

The substantive technical schedules (BSCR model, statutory economic balance sheet, and related forms) referenced throughout the Rules are not reproduced in the extracted text but are incorporated by reference and available from the Authority.

Key obligations

• Calculate the ECR at the end of each relevant year using the BSCR model or an approved internal capital model, ensuring it is at least equal to the statutory margin of solvency
• Maintain available statutory economic capital and surplus equal to or exceeding the ECR at all times
• Obtain Authority approval before substituting an internal capital model for the BSCR model, and comply with any conditions attached to that approval
• File a capital and solvency return with the Authority on or before the insurer's filing date, including the BSCR model and prescribed schedules
• File a loss reserve specialist's opinion together with the capital and solvency return
• Accompany each capital and solvency return with a declaration signed by two directors (one of whom may be the CEO) and either the chief risk officer or chief financial officer
• Retain a copy of the capital and solvency return at the principal office for five years and produce it to the Authority if directed
• File quarterly financial returns (unaudited financial statements plus intra-group transaction and large exposure details) by the last day of May, August and November each year, unless the insurer is part of a group for which the Authority is group supervisor and is exempted or granted modified requirements
• Make written representations to the Authority within 28 days of a notice refusing or revoking approval of an internal capital model, if the insurer wishes to contest the decision

Applies to

Class 4 insurers, Class 3B insurers

Deadlines

• 31st day of December 2008: Commencement date of the Rules
• last day of May, August and November of every year: Deadline for filing quarterly financial returns (for insurers not part of a group for which the Authority is group supervisor)
• on or before its filing date: Deadline for an insurer to furnish its capital and solvency return to the Authority
• within 28 days of the notice: Period for an insurer to make written representations after being notified of refusal or revocation of an internal capital model approval

Related documents

• This document is made under Insurance Act 1978
• Insurance (Prudential Standards)(Class 4 and Class 3B Solvency Requirement) Amendment Rule 2011 amends this document
• Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment (No. 2) Rules 2022 amends this document
• Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment Rules 2024 amends this document
• Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment Rules 2022 (BR 39 / 2022) amends this document
• Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment Rules 2012 amends this document
• Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment Rules 2013 amends this document