The Insurance (No. 2) Amendment Act 2019 (Amendment Act) became operative on 31 December 2019. It supplements provisions in the Insurance Act 1978 (Insurance Act) regarding the power of the Bermuda Monetary Authority (BMA) to make, and insurers' and designated insurers' right to apply for, adjustments to the enhanced capital requirement, available statutory capital and surplus and available statutory economic capital and surplus of an insurer or insurance group.
Adjustment of the total statutory capital and surplus
These provisions make explicit the BMA's power to adjust the total statutory capital and surplus (Line 40 of Form 1EBS) and they extend rights of insurers and designated insurers to apply for adjustments. In many ways these are tidy-up changes and clarifications. But they are important in that they make explicit certain rights of insurers and designated insurers and powers of the BMA.
The Amendment Act amends Sections 6D(1) and (7) of the Insurance Act to provide explicitly for the BMA's power to adjust (of its own volition) an insurer's total statutory capital and surplus, and for an insurer or designated insurer to apply for an adjustment to its or its group's available statutory economic capital and surplus and total statutory capital and surplus. There was previously no explicit power of the BMA to adjust total statutory capital and surplus, or of insurers' and designated insurers' right to apply for such an adjustment. Furthermore, while insurers and designated insurers already had the right to apply for an adjustment of their enhanced capital requirement and available statutory capital and surplus, it was not explicit that they had the right to apply for adjustments to their available statutory economic capital and surplus.
Rights to appeal a decision to adjust total statutory capital and surplus
The Amendment Act makes a consequential amendment to Section 44A of the Insurance Act. This section already provided for an insurer's or designated insurer's right of appeal to a tribunal if it is aggrieved by a decision of the BMA under Section 6D(1) to make an adjustment to its enhanced capital requirement or available statutory capital and surplus. It is now clear that this includes rights to appeal a decision to adjust total statutory capital and surplus or available statutory economic capital and surplus.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Kennedys operates in Bermuda in association with Kennedys Chudleigh Ltd.