Insurance (Prudential Standards) (Class C, Class D and Class E Solvency Requirement) Amendment Rules 2018 (Schedules)

Summary

This document is the set of Class C schedules (statistical and reporting forms) attached to the Bermuda Monetary Authority's 2018 amendment rules for the Class C, Class D and Class E Bermuda Solvency Capital Requirement (BSCR) framework. It consists mainly of detailed reporting forms, tables and accompanying instructions that Class C insurers must use to report their investments, derivatives, funds held under reinsurance and interest rate exposures for solvency calculation purposes.

• Fixed income and equity investments (Part IIB): Insurers must categorize and report quoted and unquoted bonds, mortgage-backed securities, bond mutual funds, mortgage loans and equity holdings by BSCR rating, using the latest AM Best, S&P, Moody's or Fitch ratings and applying the most conservative rating where ratings differ; unrated securities are assigned BSCR rating 8.
• Funds held by ceding insurers and under retrocession (Part IIC): Insurers must report funds held by ceding reinsurers and under retrocession, broken down by fixed income, equity, mortgage and cash holdings, following the same BSCR rating and classification rules.
• Segregated account company assets and liabilities (Part IID): Insurers must report segregated account company assets and liabilities by BSCR rating using the same categorization approach.
• Interest rate shock exposures (Part XXIII): Insurers must report all interest rate sensitive assets and liabilities (fixed income assets, deposits, loans, reinsurance receivables, derivatives, segregated account assets/liabilities, funds held by ceding insurers and under retrocession) under both up and down interest rate shock scenarios, by currency.
• Classification criteria: Sovereign debt issued by a country in its own currency and rated AA- or better is classified as BSCR rating 0; other sovereign bonds are classified like corporate bonds; government-guaranteed debt (excluding government mortgage-backed securities) is also assigned BSCR rating 0.
• Look-through approach: Exposures to collective investment vehicles and other fund-packaged investments must be determined using a look-through approach in accordance with criteria prescribed by the Authority.

These schedules operate as prescribed reporting templates and instructions supporting the Class C, D and E solvency requirement rules; they do not themselves set new capital thresholds but define how insurers must compile and classify data feeding into the BSCR calculation.

Key obligations

• Class C insurers must classify fixed income investments and preferred stocks by BSCR rating using the latest available AM Best, S&P, Moody's or Fitch ratings.
• Where a security receives different ratings from different agencies, insurers must use the most conservative rating for classification.
• Insurers must assign a BSCR rating of 8 to unrated securities.
• Insurers must classify sovereign debt rated AA- or better issued in its own currency as BSCR rating 0, and classify other sovereign bonds similarly to corporate bonds.
• Insurers must assign a BSCR rating of 0 to debt issued by, or explicitly guaranteed by, a government (excluding government-issued mortgage-backed securities).
• Insurers must apply the look-through approach prescribed by the Authority when determining exposures for collective investment vehicles and fund-packaged investments.
• Insurers must report funds held by ceding reinsurers and under retrocession, including identifiable assets and liabilities such as fixed income, equity, mortgage loans and cash equivalents.
• Insurers must report all interest rate sensitive assets and liabilities, by currency, under both interest rate up-shock and down-shock scenarios.
• Insurers must classify equity investments into long exposures and short exposures (qualifying and not qualifying as risk-mitigation assets) according to Authority-prescribed criteria.

Applies to

Class C insurers, Class D insurers, Class E insurers