Insurance (Prudential Standards) (Class C, Class D and Class E Solvency Requirement) Amendment (No.2) Rules 2019

Summary

This instrument amends several schedules of Bermuda's Insurance Prudential Standards Rules that set out the Bermuda Solvency Capital Requirement (BSCR) framework for Class C, Class D and Class E insurers (and related classes covered by the same schedules). It changes how credit ratings are used in BSCR calculations for fixed income securities, preferred stock and cash equivalents, replacing embedded rating tables/charts with a list of credit rating agencies and ratings to be prescribed directly by the Bermuda Monetary Authority (BMA).

• Credit rating agency provision replaced: Paragraphs in the instructions affecting Schedules II, IIA, IIB, IIC, IID, IIE, IIF and the corresponding parts of Schedule XIII are revoked and replaced so that the list of approved credit rating agencies and how their ratings must be applied to fixed income securities and preferred stock will be prescribed by the BMA, rather than fixed in the rules.
• Embedded BSCR ratings tables removed: The BSCR Ratings Schedules, Tables and Charts previously set out within Schedules II, IIA, XIII (Parts II, IIA, XVIII, XIX, XIXA) and Schedule XVIII, XIX and XIXA are deleted or revoked, consistent with ratings now being prescribed separately by the Authority.
• Short term rating provisions updated: Schedules XIX and XIXA (and the corresponding parts of Schedule XIII) are amended so that short term credit ratings used for cash and cash equivalent balances are prescribed by the BMA, with long-term ratings permitted as an alternative where prescribed.

The Rules come into operation on 1 January 2020 but apply retroactively to financial years commencing on or after 1 January 2019, meaning affected insurers' BSCR filings for that financial year must reflect the amended credit rating provisions. The detailed schedules themselves are published separately on the BMA's website rather than in this instrument.

Key obligations

• Insurers within the scope of Schedules II, IIA-IIF, XIII, XVIII, XIX and XIXA must use the list of credit rating agencies and rating application methodology prescribed by the BMA (rather than the previously embedded BSCR Ratings tables) when determining BSCR ratings for fixed income securities and preferred stock.
• Insurers must apply BMA-prescribed short term (or alternatively long-term, where prescribed) credit ratings when determining the appropriate BSCR rating for cash and cash equivalent balances under Schedules XIX and XIXA and corresponding parts of Schedule XIII.
• Insurers must apply these amended BSCR rating provisions for financial years commencing on or after 1 January 2019.

Applies to

Class C insurers, Class D insurers, Class E insurers, insurers subject to Schedules II, IIA, IIB, IIC, IID, IIE, IIF, XIII, XVIII, XIX and XIXA of the Insurance Prudential Standards Rules

Deadlines

• 1 January 2020: Date on which these amendment Rules come into operation.
• financial years commencing on or after 1 January 2019: Period to which the amended BSCR credit rating provisions apply.

Related documents

• This document is made under Insurance Act 1978