On 1 January 2014, a number of amendments to Bermuda's insurance legislation became effective. The main focus of the amendments is the Bermuda Solvency Capital Requirements (BSCR). The BSCR is applicable to all commercial class insurers.
Proposals were subsequently put forward by the Bermuda Monetary Authority (BMA) to include long-term insurers and insurance groups, subject to the Insurance (Group Supervision) Rules 2011. The BMA identified elements of the BSCR for long-term insurers that warranted refinement to more effectively reflect the underlying risks. Refinements (BSCR Refinements) to the long-term insurance BSCR address several broad areas covering:
- investment risks;
- credit risks;
- longevity risks;
- variable annuity risks; and
- miscellaneous and consequential items.
The long-term BSCR requirement will be phased in over three years, starting at 50% for year-end 2013, 75% for year-end 2014 and 100% thereafter.
Additional corresponding amendments were made to the BSCR for P&C companies. The changes are expected to result in reduced BSCR requirements in most cases. For P&C companies, the changes to credit risk also have some consequential impact on credit risk aspects with the catastrophe risk module.
All of the changes for P&C companies take immediate effect from 1 January 2014. Since the BMA undertook last year not to change the BSCR in 2013, however, any company that experiences difficulties with the new requirements should discuss the matter with one of the named Appleby attorneys below.
The BSCR Refinements listed above are also reflected in the insurance groups BSCR. As previously agreed with the industry, taking into account the relatively early stage of development of consolidated group capital requirements globally, the amendments to the insurance groups BSCR will be phased in over several years, starting at 50% for year-end 2013, and rising by 10% each year until it reaches 100% for year-end 2018.
In addition to the BSCR amendments, a number of housekeeping and technical issues were addressed.
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.
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