Regulatory Procedure - Approval and Notification of Changes - Class B, C and D Insurers and Portfolio Insurance Companies (January 2014)

Summary

This is a CIMA regulatory procedure, dated January 2014, that explains which changes to the business plan or licence application information of Class B, C and D insurers and Portfolio Insurance Companies require CIMA's prior written approval versus merely prior notification. It implements the statutory requirement (Insurance Law, 2010, s.8(1)(a) and Insurance (Amendment) Law, 2013, s.28D(c)) that licensees carry on business only in accordance with their approved business plan and application information, and must seek prior written approval for changes to that plan.

Business plan changes requiring prior approval

• Adding new lines of business
• New (re)insurance transactions outside the approved plan
• Outward/inward transfers via assignment, commutation, novation, or loss portfolio transfer
• Material changes to retention, limits, or aggregates
• Changing a fronting/ceding carrier or reinsurer rated below A-/A- equivalent
• Changes to funding or loss reserving policy
• Adopting or changing an internal capital model
• Changes to investment policy affecting certain asset classes
• Changes in dividend policy
• Loan requests
• Change of actuary

Changes requiring prior notification only

• Claims management/TPA changes
• Changing a fronting/ceding carrier or reinsurer rated above A-/A- equivalent
• Dividend payments consistent with an approved policy
• Change of investment manager or custodian
• Placing operations into run-off
• Change of financial year-end

Changes always requiring prior approval under the Insurance Law

• Adding a segregated portfolio
• Change of auditor or insurance manager
• Changes to memorandum and articles
• Change of name
• Change in ownership above or below 10% thresholds
• Appointment of directors, officers, or managers
• Audit waiver requests
• Licence surrender or cancellation

For each category the procedure lists the minimum documentation insurers must submit to CIMA when seeking approval or making a notification, and notes that approval requests are subject to the applicable Monetary Authority Law fee, while notifications are not. CIMA retains discretion to treat a notified change as material and require prior approval instead.

Key obligations

• Insurers must obtain the Authority's prior written approval before making any change classified as a 'business plan change requiring prior approval' (Section 3), including new lines of business, new (re)insurance transactions outside the approved plan, outward/inward transfers, changes to internal capital models, and changes to investment policy affecting classes 5-8 assets.
• Insurers must seek prior written approval before changing retention/limits/aggregates if the change within a 12-month period exceeds 20% of current levels (where these are US$300,000 or lower) or exceeds 10% of current levels above US$300,000.
• Insurers must seek prior approval before changing a fronting/ceding carrier or reinsurer/retrocessionaire if the new counterparty is rated below A- by AM Best or A- by Fitch (or equivalent).
• Insurers must provide prior notification to the Authority for the changes listed in Section 4 (e.g. claims management/TPA changes, fronting/ceding carrier or reinsurer changes above the A- rating threshold, dividend payments consistent with an approved policy, change of investment manager/custodian, run-off, change of financial year-end).
• Insurers must obtain the Authority's prior written approval for changes mandated by the Insurance Law (Section 5), including addition of a segregated portfolio, change of auditor, change of insurance manager, change to memorandum and articles of association, change of name, change in ownership, appointment of directors/officers/managers, audit waiver requests, and licence surrender/cancellation.
• Insurers must submit the specified supporting documentation (as listed for each change type) together with any applicable fee under the Monetary Authority Law when seeking approval.
• Insurers must pay the applicable business plan change fee under the Monetary Authority Law (2013 Revision) when applying for approval of a business plan change.

Applies to

Class B insurers, Class C insurers, Class D insurers, Portfolio Insurance Companies