Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Rules 2011

Summary

This is a draft Bermuda Monetary Authority rule that would set group-level capital and solvency requirements for insurance groups. It establishes an Enhanced Capital Requirement (ECR) for insurance groups, prescribes a Group Bermuda Solvency Capital Requirement (BSCR) model (or an approved internal capital model as an alternative), and creates reporting obligations including an annual group capital and solvency return and a quarterly financial return.

• ECR and capital adequacy: Every designated insurer must ensure its insurance group calculates an ECR (using the Group BSCR model or an approved internal capital model) and maintains available statutory capital and surplus equal to or exceeding that ECR.
• Internal capital model approval: A designated insurer may apply on the group's behalf to substitute an approved group internal capital model for the Group BSCR model; the Authority may approve, refuse, or later revoke approval, and the insurer may make written representations within 28 days of an adverse notice.
• Annual capital and solvency return: The insurance group must file an annual group capital and solvency return (electronic and printed versions, per the specified schedules) on or before its filing date, accompanied by a declaration signed by two directors and the chief executive attesting it fairly represents the group's financial condition.
• Record retention: A copy of the capital and solvency return must be kept at the designated insurer's principal office for five years from the filing date and produced to the Authority on request.
• Quarterly financial return: The group must also file a quarterly unaudited consolidated financial statement (balance sheet and income statement) plus intra-group transaction, reinsurance/retrocession, and top-counterparty exposure details, due on or before the last day of every third month beginning three months after the filing date.
• Offences: Knowingly or recklessly making a false or misleading statement or return to the Authority is a summary offence carrying a fine of up to $50,000.

The rules are dated as a draft (December 31, 2010) and specify a commencement date of 30 June 2011; because the document is marked as a draft, its provisions may not reflect the final rules ultimately adopted by the Authority.

Key obligations

• Designated insurers must ensure the insurance group's available statutory capital and surplus is equal to or exceeds the calculated ECR at all times.
• Designated insurers must ensure the group files an annual group capital and solvency return (per Schedules I to XIII) on or before its filing date, in both electronic and printed form.
• Every group capital and solvency return must be accompanied by a declaration signed by two directors and the chief executive of the parent company.
• Designated insurers must 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 on direction.
• Designated insurers must ensure the group files a quarterly financial return (unaudited consolidated financial statements plus intra-group transaction and counterparty exposure details) on or before the last day of every third month beginning three months after the filing date.
• A designated insurer seeking to use an internal capital model instead of the Group BSCR model must apply to the Authority for approval and may make written representations within 28 days of a notice refusing or proposing to revoke approval.
• Persons must not knowingly or recklessly make false or misleading statements or returns to the Authority.

Applies to

designated insurers, insurance groups, parent companies of insurance groups

Deadlines

• 30th of June 2011: Stated commencement date of the Rules
• on or before its filing date: Deadline for the insurance group to furnish the Authority with its annual capital and solvency return
• five years beginning with its filing date: Period a designated insurer must retain a copy of the group's capital and solvency return
• on or before the last day of every third month beginning three months after its filing date: Deadline for filing the quarterly unaudited group financial statements
• within 28 days from the date of the notice: Period for a designated insurer to make written representations after being notified of a refusal or proposed revocation of an internal capital model approval

Related documents

• This document is made under Insurance Act 1978
• Notice - Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Amendment Rules 2012 (2012-11-14) amends this document
• Notice - Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Amendment Rules 2012 (2012-11-14) amends this document
• Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Amendment Rules 2012 amends this document
• Notice - Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Amendment Rules 2013 (consultation) amends this document
• Notice - Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Amendment Rules 2015 amends this document