Exemption Guidelines for Licensees in Run-off, Solvent Liquidation or Insolvent Liquidation

Summary

These are guidelines issued by the BVI Financial Services Commission allowing licensees that are in run-off, solvent liquidation or insolvent liquidation to apply for an exemption from certain standard regulatory obligations, since ongoing compliance may be unduly burdensome once a licensee has effectively ceased its regulated business. The exemption is not automatic; it must be applied for and approved, and is conditional on strict ongoing compliance.

• Who can apply: Licensees under the Banks and Trust Companies Act, Insurance Act, Securities and Investment Business Act (SIBA), Financing and Money Services Act, and Company Management Act that are in solvent liquidation, insolvent liquidation, or (for run off specifically) Captive insurers only.
• What is exempted: Approved licensees may be excused from requirements to have an auditor, audited financial statements, a compliance officer, an annual compliance officer report, an internal audit function, an investment manager and custodian, and prudential returns (subject to which requirements apply to which licence type).
• Qualifying conditions: Solvent liquidation applicants must already have Commission approval to enter voluntary liquidation; insolvent liquidation applicants must have notified the Commission of the liquidator's appointment under section 178(1)(d) of the Insolvency Act; Captive insurers entering run-off must have informed the Commission per paragraph 6.4.1.
• Application requirements: Written letter application with supporting declarations from a director, authorised representative, legal representative or liquidator confirming cessation of regulated business (or details of winding-down activity), plus, for run-off, detailed information on run-off strategy, reinsurance contracts, policyholders and financial position.
• Prohibitions: Exempted licensees are prohibited from undertaking new business or transacting outstanding business for gain, other than activity aimed at winding down the business; breach is treated as an offence under the relevant regulatory legislation.
• Ongoing obligations: To retain the exemption, licensees must, within one month of each financial year end, submit a director's declaration on regulated business conducted, unaudited financial statements or management accounts, and details of claim payments or asset disposals; annual licence fees must also remain current.
• Loss of exemption: If a licensee believes it can no longer comply with the Guidelines, it must notify the Commission within seven working days, after which the exemption ceases and full regulatory obligations resume; failure to meet the ongoing obligations also automatically ends the exemption.
• Fees: Applicants remain subject to the application and approval fees associated with seeking exemption from audited financial statement requirements under Schedule 5 of the Financial Services (Miscellaneous Exemptions) Regulations, 2010.

Applications and ongoing filings must be submitted through the licensee's Registered Agent, Legal Advisor, Insurance Manager, Authorised Representative or liquidator, addressed to the Director of the relevant supervisory Division at the Commission. The Guidelines took effect on 1 June 2018.

Key obligations

• A licensee seeking exemption must submit a written application to the Commission following the procedure applicable to its circumstance (solvent liquidation, insolvent liquidation, or run off for Captive insurers)
• An exempted licensee must not undertake new business or transact outstanding business for gain except business undertaken with a view to winding down
• An exempted licensee that forms the view it can no longer comply with the Guidelines must notify the Commission within seven working days of forming that view
• An exempted licensee must, within one month of its financial year end, submit a director's declaration on regulated business conducted, unaudited financial statements or management accounts, and details of claim payments or asset disposals for that year, in order to retain the exemption
• An exempted licensee must keep its annual licence fees paid and current under the Financial Services Commission (Fees) Regulations, 2010
• A Captive insurer entering run-off must provide detailed information on its run-off strategy, reinsurance contracts, policyholder list, and confirmation of good regulatory standing when notifying the Commission
• Applications and ongoing filings must be submitted via the licensee's Registered Agent, Legal Advisor, Insurance Manager, Authorised Representative or liquidator

Applies to

banks and trust companies, insurers (including Category A, Category D and Captive insurers), securities and investment business licensees, private, professional and public mutual funds, financing and money services licensees, company managers

Deadlines

• 1st June, 2018: Commencement date of the Exemption Guidelines
• within seven working days of forming the view: Licensee must notify the Commission if it believes it can no longer comply with the Guidelines, after which the exemption ceases
• within 1 month of financial year end: Exempted licensee must submit annual declaration, unaudited financial statements or management accounts, and details of claims/asset disposals to retain the exemption