Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Amendment Rules 2024 (BR 17/2024)

Summary

These Rules amend the Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Rules 2011, which set the group Bermuda Solvency Capital Requirement (Group BSCR) and Economic Balance Sheet (EBS) framework for insurance groups supervised by the BMA. The amendments update definitions, revise the Group BSCR formula and several technical schedules, and introduce new risk schedules and valuation principles.

• Definitions updated: Paragraph 2 revises defined terms (e.g. interest rate risk) and adds new terms including EBS Valuation basis, expense risk, lapse risk, group life/health/disability insurance, and natural/man-made catastrophe risk.
• Adjustments mechanism: A new subparagraph allows a designated insurer to apply to the Authority for adjustments under new Schedule XXIV (Schedule of Adjustments).
• Schedules revoked and replaced: Schedule I (Group BSCR), Schedule VIII (Long-Term Variable Annuity Guarantees Data and Reconciliation), Schedule XIV (Group Statutory Economic Balance Sheet) and Schedule XV (Group Actuary's Opinion) are revoked and replaced with updated versions.
• New schedules inserted: Schedule VIIA (Lapse Risk), Schedule VIIB (Long-Term Expense Risk), Schedule XA (Man-Made Catastrophes), Schedule XXIV (Adjustments) and Schedule XXV (Economic Balance Sheet Valuation Principles) are added to the principal Rules.
• Cross-reference updates: Schedules VII, VIIIA, XX, XXA, XXI and XXIA are amended to refer to the new Schedule XXV instead of the former Schedule XIV for EBS valuation principles.
• Transitional arrangements for long-term business: New Schedule XXV instructions provide a 16-year transitional arrangement for long-term business written on or before 31 December 2015 under the standard approach, phasing in new valuation methods.

The Rules came into operation on 31 March 2024. Detailed schedule content (formulas, capital charge tables and instructions) is published on the BMA's website as permitted under section 6A(8) of the Insurance Act 1978.

Key obligations

• A designated insurer wishing to make adjustments to its Group BSCR calculation must apply to the Authority in accordance with new Schedule XXIV.
• Insurance groups must calculate their Group BSCR on an EBS Valuation basis in accordance with the revised Schedule I formula and referenced schedules (including new Schedules VIIA, VIIB, XA, XXIV and XXV).
• Insurance groups must value technical provisions in accordance with the Economic Balance Sheet Valuation Principles set out in new Schedule XXV, including rules on replication of cash flows and unbundling of policies.
• Insurance groups with long-term business written on or before 31 December 2015 under the standard approach must apply the prescribed 16-year linear transitional formula to determine technical provisions, and may apply under section 6D(7) of the Insurance Act for transitional adjustments regarding risk margin allocation, providing details of the business and methodology used.

Applies to

insurance groups, designated insurers

Deadlines

• 31 March 2024: Commencement date of the Amendment Rules 2024.
• 16-year transitional period from 2015 reserve valuation basis (years 2016-2023 and beyond, per formula): Transitional arrangements for phasing in new EBS valuation technical provisions for long-term business written on or before 31 December 2015 under the standard approach.

Related documents

• This document is made under Insurance Act 1978