Insurance (Prudential Standards) (Class C, Class D and Class E Solvency Requirement) Rules 2011

Summary

These Bermuda Monetary Authority Rules set out the Enhanced Capital Requirement (ECR) and capital and solvency return regime applicable to Class C, Class D and Class E (re)insurers in Bermuda. They prescribe how the Bermuda Solvency Capital Requirement (BSCR) model is used to calculate the ECR, allow for use of an approved internal capital model instead, and require insurers to hold sufficient statutory economic capital and surplus and to file detailed capital and solvency returns with supporting actuarial opinions and director declarations.

ECR calculation: Every insurer must calculate its ECR at the end of its relevant (financial) year using the applicable Class C, Class D or Class E BSCR model (Schedule I) or an Authority-approved internal capital model, and the ECR must never be less than the statutory minimum margin of solvency.
Capital adequacy: Insurers must maintain available statutory economic capital and surplus (Form 4EBS, Line 40) equal to or exceeding the ECR.
Internal model approval: Insurers may apply to the Authority to use an internal capital model in place of the standard BSCR model; the Authority can approve, refuse, impose conditions, or later revoke approval, with a 28 day representation period for the insurer after notice.
Capital and solvency return: Class D and Class E insurers must file returns per Schedules I, II series, IV(A), V to IX, XII, and XIV to XXIV; Class C insurers file per Schedules XIII, XIV and XV, comprising an electronic BSCR model and printed prescribed returns.
Actuarial opinion: At the time of filing the capital and solvency return, insurers must also file an opinion from their approved actuary addressing technical provisions calculated per Form 4EBS Line 27C.
Declaration and record-keeping: Each return must be accompanied by a declaration signed by two directors and the principal representative confirming it fairly represents the insurer's financial condition; insurers must retain a copy of the return at their principal office for five years from the filing date and produce it to the Authority on request.
Offences: Knowingly or recklessly making a false or misleading statement or return in connection with these Rules is an offence, carrying a fine of up to 50,000 dollars on summary conviction.

The Rules commenced on 31 December 2011 and have been amended multiple times since, including phased introduction of the ECR requirement and a transitional factor schedule phasing in certain BSCR charges from 10 percent in the 2019 financial year up to 100 percent by the 2028 financial year.

Key obligations

Calculate ECR at the end of each relevant year using the applicable Class C, Class D or Class E BSCR model or an Authority-approved internal capital model, ensuring the ECR is never less than the statutory minimum margin of solvency
Maintain available statutory economic capital and surplus equal to or exceeding the ECR at all times
Class D and Class E insurers must file a capital and solvency return in accordance with the prescribed Schedules; Class C insurers must file per Schedules XIII, XIV and XV
File, together with the capital and solvency return, an opinion of the insurer's approved actuary addressing technical provisions per Form 4EBS Line 27C
Furnish the capital and solvency return to the Authority on or before the insurer's filing date
Keep a copy of the capital and solvency return at the insurer's principal office for five years from the filing date and produce it to the Authority if directed
Accompany each capital and solvency return with a declaration signed by two directors and the principal representative attesting to its fair representation of the insurer's financial condition
Where the Authority proposes to refuse or revoke approval of an internal capital model, the insurer may make written representations within 28 days of the notice

Applies to

Class C insurers, Class D insurers, Class E insurers

Deadlines

31 December 2011: Commencement date of these Rules
1 January 2014: Compliance with paragraph 3 (ECR requirement) was not required until this date, per paragraph 9(2)
financial year ending 2013: Original phase-in: applicable ECR was 50% of the amount determined by Schedule I or an approved internal capital model
financial year ending 2014: Original phase-in: applicable ECR was 75% of the amount determined by Schedule I or an approved internal capital model
financial year ending 2015 and beyond: Original phase-in: applicable ECR was the full amount determined by Schedule I or an approved internal capital model
financial year beginning on or after 1 January 2019 through 1 January 2028 (10% increments): Transitional Factor in the BSCR formula (Schedule I) phases from 10% in 2019 up to 100% by 2028
28 days from date of notice: Period within which an insurer may make written representations after being notified of a decision not to approve, or a proposal to revoke approval of, an internal capital model
filing date (per section 17(4) of the Insurance Act 1978): Deadline by which an insurer must furnish its capital and solvency return to the Authority
five years from filing date: Period for which an insurer must retain a copy of its capital and solvency return at its principal office

Insurance (Prudential Standards) (Class C, Class D and Class E Solvency Requirement) Rules 2011

Summary

Key obligations

Applies to

Deadlines

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