On 8 August 2008, the Bermuda Monetary Authority (the BMA) announced significant enhancements to Bermuda’s solvency and disclosure regulations for insurance which were intended to help Bermuda achieve recognition as having equivalent regulatory standards to those in Europe (see our previous post here). The BMA has recently issued its Regulatory Update for October 2008 which addresses recent activities at the BMA affecting the financial sector and sets out an update on further steps the BMA is taking to move Bermuda towards the European Solvency II approach. They include the following:
(a) the issue of a draft order, the Insurance (Prudential Standards) (Class 4 Solvency Requirement) Order 2008, for consultation. This Order sets out the prudential standards that Class 4 companies must comply with when submitting a Capital and Solvency Return and its purpose is to facilitate the implementation of the BMA’s enhanced risk-based capital model, the Bermuda Solvency Capital Requirement (BSCR). The BMA anticipates this Order coming into force on 31 December 2008;
(b) amendments to the Insurance Accounts Regulations 1980. These set out the statutory financial accounting requirements for the purposes of BSCR which will be more onerous, involving the submission of more detailed balance sheets and income statements to the BMA. The amendments are due to be put before Parliament, but it is expected they will come into effect on 31 December 2008; and
(c) progress being made in the introduction of regulator-approved internal models to be used for determining regulatory capital for (re)insurers. The BMA has undertaken a survey of Class 4 insurers and currently is conducting a trial review with a small number of companies. The findings from these will be reported later this year and it is hoped that the approval process will be in place for the reporting year 2009.
The BMA also recently issued guidance notes on the reclassification application requirements for Class 3 companies, provided for under the Insurance Amendment Act 2008. These companies must submit an application by 31 December 2008. Both the Guidance Notes and the application form are available on the BMA’s website (www.bma.bm/).
For a copy of the BMA’s Regulatory Update October 2008, please click here.