Practice Direction Number 1 of 2006

Summary

This Practice Direction from the BVI Financial Services Commission clarifies three defined terms used in the Insurance (Amendment) Regulations, 2005, which expanded the list of allowable and non-allowable assets for insurers under Regulation 8 of the Insurance Regulations, 1995. It does not create new substantive requirements but formally defines which institutions and ratings insurers may rely on when classifying investment assets.

• Recognised credit assessment institutions: Standard and Poor's, Fitch Ratings and Moody's Investor Services are the credit rating agencies recognised by the Commission for classifying insurance allowable assets.
• Recognised stock exchanges: Stock exchanges that are members of the World Federation of Exchanges are recognised by the Commission; a list of member exchanges is provided in Appendix 1 (noting the list may change over time).
• High and medium grade ratings: High grade is defined as Aaa to Aa (Moody's) or AAA to AA (Standard and Poor's / Fitch); medium grade is defined as A to Baa (Moody's) or A to BBB (Standard and Poor's / Fitch).

Insurers and their advisers should use these definitions when assessing whether an investment qualifies as an allowable asset for regulatory purposes under the amended Insurance Regulations.

Key obligations

• Insurers must assess allowable assets using only the credit assessment institutions recognised by the Commission (Standard and Poor's, Fitch Ratings, Moody's Investor Services) and stock exchanges that are members of the World Federation of Exchanges.
• Insurers must classify investments as high grade or medium grade using the specific rating bands set out in the Practice Direction when determining allowable assets under Regulation 8 of the Insurance Regulations, 1995.

Applies to

insurers