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Research and Briefings

Regulatory Bulletin – May 2018


RG No. 1/18

Bermuda Solvency Capital Requirement Consultation

On March 29, 2018, the Bermuda Monetary Authority (BMA) published a number of consultation documents as it considers restructuring certain aspects of the Bermuda Solvency Capital Requirement (BSCR) standard formula.

The BMA is considering this restructuring to “ensure that capital requirements are in line with best practice in terms of solvency regimes.”  The BMA has further indicated that changes made to the valuation framework present an opportunity for an overhaul of the modeling approach of certain aspects of the BSCR standard formula. As part of this exercise, the BMA has consulted with the insurance industry on additional adjustments. The ultimate goal is to further increase the risk sensitivity of the BSCR standard formula and “better reflecting how insurers manage risk.”

The BMA will shortly conduct a final round of field testing on the proposed changes, with a stakeholder letter on the feedback from the consultation process and trial runs being published on July 31, 2018.  It is anticipated new rules will comes into force on January 1, 2019, and apply to Class 3A, 3B, 4, C, D, and E licenced insurers.

Republish consultation paper, outline rules, and draft associated BSCR models based on consultation feedback and the results of the trial-run exercise using financial data as of December 31, 2016.

March 31, 2018

Trial-run of proposals using financial data as of December 31, 2017.

May 31, 2018 (both Legal Entities and Groups)

Stakeholder letter on feedback from the consultation process and the two rounds of trial-run.

July 31, 2018

New rules published.

July 31, 2018

New rules enter into force.

January 1, 2019

The BMA has advised that “The calibration of the approaches has been performed using a mix of benchmarking with other major risk based supervisory regimes (Solvency II, the Swiss Solvency Test and the draft Insurance Capital Standard of the International Association of Insurance Supervisors), empirical data and expert judgment. The charges are calibrated to the underlying nature of risks underwritten in Bermuda.”

The full consultation paper can be found here.

Marsh has been part of a team making submissions to the BMA to ensure that the Bermuda regulatory regime remains robust yet nimble for our clients.

Economic Balance Sheet Guidance Note

On December 7, 2017, the BMA published a Guidance Note, which set out the authority’s expectations for the provision of formal professional opinions that are required on the insurance technical provision elements of the Economic Balance Sheet (EBS). The scope of the Guidance Note included the EBS actuarial opinion requirements for all commercial legal entities and groups covered by the relevant legislation including: Class 3A, Class 3B, Class 4, Class C, Class D, and Class E (re)insurers.

Anti-Money Laundering (AML) and Know Your Client (KYC) Regime

Insurers engaging in long-term business have long been obliged to abide by Bermuda’s AML/KYC regime overseen by the BMA. However, you may not be aware that insurance managers and corporate service providers are also obliged to follow the AML/KYC regime.

This means that all Bermuda insurance managers and corporate service providers must have risk assessment processes,  policies, and procedures in place to confirm the identity of clients.  Marsh has accordingly adopted a comprehensive AML/KYC policy that we must follow to comply with both MMC policy and Bermuda law. The information collected in respect to our clients is stored securely electronically.  However, we must keep this information up-to-date so expect to hear from your client executive from time to time to provide updated information.  All of us are responsible for combatting money laundering and terrorist financing.

Beneficial Ownership

Bermuda’s current regulatory regime requires that beneficial ownership information is disclosed to the BMA upon the incorporation of a company. However, in a further drive for transparency, and to comply with OECD requirements, this regime will be extended during 2018  which will include (i) implementing comprehensive filing on specified beneficial owners of all companies (including limited liability companies); (ii) requiring notification of a change in beneficial ownership to be filed with the BMA; (iii) expanding the disclosure requirements to include other types of controllers other than members with voting rights. The BMA is consulting with stakeholders on these changes to develop the regulations around this initiative.

Bribery Act 2016

On September 1, 2017, Bermuda’s Bribery Act came into force.  This is almost identical to that of the UK Bribery Act 2010 and is designed to combat bribery in all its forms. The Bribery Act 2016 was introduced to enhance Bermuda’s international reputation for holding the highest ethical standards. Corruption, including bribery, raises the costs and risks of doing business and it has a corrosive impact on both market opportunities overseas for US companies and the broader business climate. It also deters international investment, stifles economic growth and development, distorts prices, and undermines the rule of law.  The Bribery Act will continue to ensure that Bermuda remains a premier jurisdiction for insurance-related business.

Personal Information Protection Act

Bermuda passed the Personal Information Protection Act in 2016 which is anticipated to come into force at the end of 2018. This Act formalizes what Marsh already does globally – protects the data of its clients. As regulations become operational we will update you as to whether there are any changes in respect of how we process and handle your data.