The BMA has recently issued a bulletin which reports on its recent activities and on recent developments affecting the financial sector, as well as the community generally. The bulletin includes the following regulatory update on the (re)insurance sector.
Mutual regulatory recognition
The BMA continues to work towards its goal of achieving mutual recognition with the European and US markets. A Discussion Paper on Implementing Group-wide Supervision was published at the end of Q1 2009 and includes a discussion on key issues such as the determination of group solvency, the treatment of intra-group transactions, eligible capital, reporting requirements, group corporate governance and risk management. The BMA’s intends to ensure that Bermuda’s standards are broadly equivalent to international standards being developed in this regard, in particular with Europe's Solvency II Directive [click here to see the EAPD blog post on the BMA’s group-wide supervision discussion paper].
Memorandum of Understanding (MoU) with Luxembourg
In January 2009, the BMA signed a MoU with the Luxembourg Commissariat aux Assurances, Luxembourg's regulator of the insurance sector, which provides for direct cooperation between Bermuda and Luxembourg. The bulletin notes that such cooperation further facilitates the exchange, handling and protection of information between the BMA and the Commissariat and, where appropriate, investigative assistance with respect to regulated entities. This MoU entered into with the Commissariat follows a MoU signed with the New York State Insurance Department in September 2008. [A blog discussing this MoU can be found by clicking here.]
The Insurance Amendment Act 2008 (the Act) provided for revised prudential standards and for capital and solvency returns to be completed by Class 4 insurers. The Act also provided for the creation of new classes of insurers, namely Class 3A, Class 3B and Special Purpose Insurers. The Insurance Accounts Amendment Regulations 2008 and the Insurance Returns and Solvency Amendment Regulations 2008 (together the Regulations) were passed and came into force at the end of 2008. The Regulations impose new filing and solvency requirements for Class 3A, Class 3B and Class 4 companies as well as for Special Purpose Insurers and formally make the new classes of insurers subject to similar provisions as existing classes of insurers, including in relation to filing of statutory financial returns and minimum solvency requirements.
The BMA is nearing completion of its reclassification project for the Class 3 sector. It is on target to have all new Certificates of Registration for Class 3A and Class 3B insurers issued by 31 March 2009.
The BMA reports on the recent findings in the fifth edition of the Global Reinsurance Market Report (GRMR) produced by the Reinsurance Transparency Subgroup of the International Association of Insurance Supervisors in December 2008, chaired by Deputy CEO of the BMA, Jeremy Cox. The GRMR found that:
- the reinsurance sector remained relatively robust and resilient to the adverse global market conditions;
- the key to the reinsurers’ resilience was the global nature of reinsurers and the diversification strategy that they pursued;
- the investment strategy of reinsurers provided stability during a volatile market with reinsurers relying on fixed income products, real estate and high quality equities;
- mutual recognition may help to remove significant amounts of unnecessary regulation whilst promoting transparency, and that increased supervisory recognition would contribute to the long-term resilience of the global reinsurance market.