Insurance (Technical Standards) (Class IIGB Insurers) (Solvency Requirement) Rules 2020 (BR 41 / 2020)

Summary

These Rules, made by the Bermuda Monetary Authority under section 6A of the Insurance Act 1978, set the solvency and capital requirements for Class IIGB insurers, a category of digital asset focused insurers. They establish the enhanced capital requirement (ECR) methodology, the BSCR-IIGB capital model, and the annual Capital and Solvency Return that these insurers must file.

• ECR calculation: Each Class IIGB Insurer must calculate its ECR at the end of each financial year using either the BSCR-IIGB model or an Authority-approved internal capital model, but the ECR can never be less than the minimum solvency margin required under section 6 of the Act.
• Capital adequacy: Every Class IIGB Insurer must maintain available statutory capital and surplus equal to or exceeding its ECR at all times.
• Internal model approval: Insurers wishing to use an internal capital model instead of the BSCR-IIGB model must apply for Authority approval; the Authority can approve with conditions, refuse, or later revoke approval, and insurers have 28 days to make written representations against a refusal or proposed revocation.
• Capital and Solvency Return filing: Insurers must file a Capital and Solvency Return with the Authority by the filing date set under section 17(4)(b) of the Insurance Act 1978, comprising the electronic BSCR-IIGB or approved internal model output plus the prescribed schedule returns.
• Supporting documentation: The Return must be accompanied by a loss reserve specialist's opinion and a declaration signed by two directors and the principal representative in Bermuda confirming the Return fairly represents the insurer's financial condition.
• Recordkeeping: Insurers must retain a copy of the Capital and Solvency Return and accompanying documents at their principal office for five years from the filing date and produce them to the Authority on request by a specified date.

The Rules incorporate numerous risk definitions relevant to digital asset exposure (e.g. digital asset risk, stablecoin, fully-hedged arrangement) used within the BSCR-IIGB model, which is set out in Schedule I along with numerous other schedules published separately on the Authority's website. The Rules commenced operation on 30 April 2020.

Key obligations

• Calculate the ECR at the end of each relevant financial year using the BSCR-IIGB model or an approved internal capital model, ensuring it is not less than the minimum margin of solvency under section 6 of the Insurance Act 1978
• Maintain available statutory capital and surplus equal to or exceeding the calculated ECR at all times
• File a Capital and Solvency Return with the Authority on or before the filing date referred to in section 17(4)(b) of the Insurance Act 1978, including the BSCR-IIGB or approved internal model output and prescribed schedule returns
• Accompany the Capital and Solvency Return with a loss reserve specialist's opinion and a declaration signed by two directors and the principal representative in Bermuda
• Retain copies of the Capital and Solvency Return and accompanying documents at the principal office for five years from the filing date and produce them to the Authority if directed, by the date specified in the direction
• If seeking to use an internal capital model, apply to the Authority for approval and, if refused or facing revocation, may make written representations within 28 days of the notice

Applies to

Class IIGB Insurers

Deadlines

• 30 April 2020: Commencement date of the Rules
• filing date referred to in section 17(4)(b) of the Insurance Act 1978: Deadline for filing the annual Capital and Solvency Return
• 28 days from the date of notice: Period within which a Class IIGB Insurer may make written representations against refusal or proposed revocation of an internal capital model approval
• five years beginning with filing date: Period for which the insurer must retain copies of the Capital and Solvency Return and accompanying documents

Related documents

• This document is made under Insurance Act 1978