Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Rules 2011 (BR 77/2011)

Summary

These Rules, made by the Bermuda Monetary Authority under the Insurance Act 1978, set out the group solvency capital regime for Bermuda insurance groups. They define the Enhanced Capital Requirement (ECR) methodology, prescribe the Group Bermuda Solvency Capital Requirement (BSCR) model, and set out the returns, declarations and quarterly reporting insurance groups and their designated insurers must file with the Authority.

• ECR calculation: An insurance group must calculate its ECR at the end of each relevant (financial) year using either the Group BSCR model or an Authority-approved group internal capital model, and the ECR must always be at least equal to the minimum margin of solvency under the Group Rules.
• Capital maintenance: Every insurance group must maintain available statutory economic capital and surplus equal to or exceeding its ECR, calculated from Form 1EBS Line 40 with specified adjustments.
• Internal model approval: A designated insurer may apply on behalf of the group for approval to use an internal capital model in place of the Group BSCR model; the Authority assesses appropriateness, integration into risk management, and model governance controls, and may approve subject to conditions or refuse, revoke or vary approval.
• Group capital and solvency return: Every insurance group must prepare, and the designated insurer must furnish to the Authority by the group's filing date, an insurance group capital and solvency return comprising the Group BSCR model, prescribed schedules, and (where applicable) the approved internal capital model, converted to Bermuda dollars where accounts are kept in foreign currency.
• Declaration requirement: Each capital and solvency return must be accompanied by a declaration signed by two directors of the parent company (one of whom may be the CEO) and either the chief risk officer or chief financial officer, confirming the return fairly represents the group's financial condition.
• Record retention: The designated insurer must retain a copy of the group's capital and solvency return at its principal office for five years from the filing date and produce it to the Authority on request.
• Quarterly financial returns: Every insurance group must prepare and file quarterly financial returns (unaudited consolidated financial statements, intra-group transaction and risk concentration details, and largest unaffiliated counterparty exposures) by the end of May, August and November for the first, second and third quarters respectively.

The Rules also address offences for non-compliance and commencement, and include detailed technical schedules (including the Group BSCR model and interest rate sensitivity reporting) that prescribe the calculation methodology and form of the required returns.

Key obligations

• Calculate the group's ECR at the end of each relevant year using the Group BSCR model or an approved group internal capital model, ensuring it is at least equal to the minimum margin of solvency under the Group Rules
• Maintain available statutory economic capital and surplus equal to or exceeding the ECR at all times
• Furnish the Authority with a complete insurance group capital and solvency return (including electronic and printed versions of the Group BSCR model and prescribed schedules) on or before the group's filing date
• Ensure the capital and solvency return is accompanied by a declaration signed by two parent company directors (one may be CEO) and the CRO or CFO
• Retain a copy of the group's capital and solvency return at the principal office for five years from the filing date and produce it to the Authority if directed
• Prepare and file quarterly financial returns by the end of May, August and November for Q1 to Q3, including consolidated unaudited financial statements and intra-group and counterparty exposure details
• Where seeking to use an internal capital model, apply to the Authority and respond to any notice of non-approval or proposed revocation within 28 days if wishing to make representations

Applies to

insurance groups, designated insurers, parent companies of insurance groups

Deadlines

• end of May: Filing deadline for the first quarter's quarterly financial return
• end of August: Filing deadline for the second quarter's quarterly financial return
• end of November: Filing deadline for the third quarter's quarterly financial return
• 28 days from the date of notice: Period within which a designated insurer may make written representations after being served notice of non-approval or proposed revocation of an internal capital model
• five years beginning with the filing date: Period for which a designated insurer must retain a copy of the group's capital and solvency return at its principal office
• on or before its filing date: Deadline for the designated insurer to furnish the Authority with the insurance group capital and solvency return

Related documents

• This document is made under Insurance Act 1978