Insurance (Prudential Standards) (Class C, Class D and Class E Solvency Requirement) Amendment (No. 2) Rules 2015

Summary

This instrument amends Bermuda's Insurance (Prudential Standards) (Class C, Class D and Class E Solvency Requirement) Rules, which set the enhanced capital and solvency framework for these classes of (re)insurer. It revises capital charge factors for investments in affiliates, introduces a new regulatory capital requirement for regulated non-insurance financial operating entities, and expands disclosure requirements in the statutory financial return schedules.

• Capital charges: Replaces the capital charge factors for 'Investments in affiliates' in Schedule I, setting different percentages depending on whether the affiliate is an unregulated entity providing ancillary services, an unregulated non-financial operating entity, an unregulated financial operating entity, or a regulated insurance financial operating entity.
• New capital requirement: Adds a new paragraph 12 to Schedule I requiring insurers to calculate a regulatory capital requirement for regulated non-insurance financial operating entities, equal to the insurer's proportionate share of each such entity's regulatory capital requirement under the solvency laws of its home jurisdiction, to be reported via new Schedule XVI.
• New schedules: Inserts new Schedule XVI (Schedule of Regulated Non-Insurance Financial Operating Entities) and Schedule XVII (Schedule of Minimum Margin of Solvency), requiring detailed entity-level data including jurisdiction, sector classification, participation percentage, total assets, investment amount, and applicable share of regulatory capital requirement or minimum margin of solvency.
• Governance and group disclosures: Amends the instructions to Schedule V and Schedule XIII to require expanded disclosure of board and management structure, jurisdictions of key decision-making and central control functions, service provider details, group financial position, top reinsurers, and post year-end material events, plus a current group organisational chart.
• Segregated accounts: Requires insurers with segregated account business to disclose, per cell, total assets, liabilities, capital and surplus, cash and investments, net loss reserves, reinsurance recoverable, lines of business, gross and net premiums, limited recourse features, inter-cell relationships, access to the general account, and any deficit, insolvency or litigation status.

The Rules commence, and apply to financial years commencing, on 1 January 2016, so affected insurers needed to incorporate the new capital charge factors, the Schedule XVI/XVII reporting, and the expanded Schedule V and XIII disclosures into filings for financial years starting on or after that date.

Key obligations

• Insurers must apply the revised capital charge factors for investments in affiliates set out in the amended Schedule I Table 2.
• Insurers must calculate and report a regulatory capital requirement for regulated non-insurance financial operating entities using new Schedule XVI, equal to their proportionate share of each entity's regulatory capital requirement under the applicable jurisdiction's solvency laws.
• Insurers must complete new Schedule XVII, providing minimum margin of solvency data for each affiliate over which they exercise control or significant influence.
• Insurers must provide expanded governance and group structure disclosures in Schedule V and Schedule XIII, including board/management structure, jurisdictions of key decision-making, service provider details, group financial position, top reinsurer information, and a current organisational chart.
• Insurers with segregated account business must disclose detailed per-cell financial and risk information in Schedule V and Schedule XIII filings.
• These amended requirements apply to financial years commencing on or after 1 January 2016.

Applies to

Class C insurers, Class D insurers, Class E insurers

Deadlines

• 1 January 2016: Rules come into operation and apply to financial years commencing on or after this date.

Related documents

• This document is made under Insurance Act 1978