In a continuing effort to enhance the supervisory regime for Bermuda-based (re)insurers ahead of third country assessment of its framework under Solvency II, the Bermuda Monetary Authority (“BMA”) issued a 2010 Amendment to the Insurance (Prudential Standards) (Class 4 Solvency Requirement) Order of 2008. The 2010 Order, captioned Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment Order 2010, will extend the requirements currently applicable to Class 4 insurers, to Class 3B insurers.
In accordance with the Order, every Class 3B and Class 4 insurer will be required to maintain available statutory capital and surplus in an amount that is equal to or exceeds the value of the enhanced capital requirement (“ECR”) of the 1978 Insurance Act. The insurer’s ECR will be calculated at year end by reference to the Bermuda Solvency Capital Requirement (“BSCR”) or an approved internal capital model provided that an ECR will be at all times an amount equal too or exceeding, the margin of solvency as is defined in the Insurance Act. In addition, Class 3B and 4 insurers can apply to the BMA for approval to use an internal capital model in substitution for the BSCR model. The Order also imposes disclosure requirements and Class 3B and 4 insurers will be required to make capital and solvency returns to the BMA.