Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Amendment Rules 2018

Summary

These Rules amend the Bermuda Monetary Authority's Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Rules, which set out the Bermuda Solvency Capital Requirement (BSCR) methodology that insurance groups must use to calculate their group solvency margin. The amendments update the BSCR formula, insert new risk charge schedules, and revise capital charge factors used in the calculation.

• Formula changes: Paragraph 6 and Schedule I are amended to add new risk charge components (e.g. schedules IIB to IIF, IVD, IVE, XXA, XXIA, XXIII) into the group BSCR calculation formulas and correlation matrices.
• New schedules inserted: New Schedules IIB (fixed income and equity investments by BSCR rating), IIC (ceding insurer/retrocession funds by BSCR rating), IID (segregated account company assets and liabilities by BSCR rating), IIE (deposit assets and liabilities by BSCR rating), IIF (other sundry assets and liabilities by BSCR rating), IVD and IVE (premium exposure and geographic diversification schedules), XXA (currency risk), XXIA (concentration risk), and XXIII (interest rate sensitive assets and liabilities) are added to the principal Rules.
• Capital charge factor update: Table 2 capital charge factor for 'Other tangible assets - net of segregated accounts' is replaced with a revised 20.0% factor referencing specific EBS form lines.
• Transitional factor mechanism: A transitional factor is introduced for insurance groups, increasing in equal steps from 1/T to 100% over a transitional period T (three to ten years) determined by the group's relative proportion of long-term versus P&C risk, starting for financial years beginning on or after 1 January 2019.
• Publication of schedules: The newly inserted schedules will be published separately on the Authority's website (www.bma.bm).

The amendments took effect from 1 January 2019 and apply to insurance groups subject to the group solvency requirement under the principal Rules, altering how they must compute their group BSCR and associated risk charges going forward.

Key obligations

• Insurance groups must calculate their group BSCR using the amended formula incorporating the newly inserted risk charge components (Schedules IIB-IIF, IVD, IVE, XXA, XXIA, XXIII).
• Insurance groups must apply the revised 20.0% capital charge factor for 'Other tangible assets - net of segregated accounts' in Table 2 calculations.
• Insurance groups must determine and apply their applicable transitional factor (based on their long-term versus P&C risk proportions) when calculating the group BSCR for financial years beginning on or after 1 January 2019.

Applies to

insurance groups

Deadlines

• 1st January 2019: Commencement date of the Amendment Rules; also the start of the financial year from which the transitional factor calculation begins for insurance groups.

Related documents

• This document is made under Insurance Act 1978