Bermuda Issues Proposals For Insurance Group Supervision

by Phillip Morton, Investors Offshore.com

24 February 2010

The Bermuda Monetary Authority has released details of its proposed group-wide supervision framework for Bermuda’s insurance sector in a Consultation Paper entitled “Insurance Groups Regulatory Framework”.

Commenting on the consultation paper’s launch, Jeremy Cox, Chief Executive Officer at the Authority, said: “For some time now the Authority has been focused on enhancing our insurance regime in preparation for achieving regulatory equivalence under Europe’s Solvency II Directive.”

“The publication of our group supervision Consultation Paper shows that we are maintaining momentum on our regulatory change program for Bermuda’s insurance sector, and also reaching the key policy development and implementation milestones set out in our equivalence work plan. In fact, we have successfully accelerated our groups program and published this Consultation Paper ahead of schedule; it was originally due to be completed by the end of March as per our Solvency II Roadmap.”

The Consultation Paper describes the scope of the Authority’s group-wide supervision regime and outlines the conditions under which the Authority would seek to be considered a Group-wide Supervisor. It also describes other features of the framework including: the assessment of group corporate governance and risk management; group-wide solvency assessments, which includes a discussion of the treatment of intra-group transactions and risk concentrations; and the Authority’s statutory reporting requirements for groups. In addition, the Paper explores the efficacy of group support as an important factor in determining group-wide solvency, and the treatment of unregulated entities that are part of the group. Since any group-wide supervisory regime hinges on the principle of supervisory cooperation and equivalence among regulators, the Paper also seeks to explain the Authority’s own proposed equivalence framework.

Cox added that the Authority recognises it will require significant resources to support implementation of group supervision effectively. “In order for us to conduct group assessments for supervisory purposes, effectively be a group-wide supervisor, and participate in additional supervisory colleges, we will need to have appropriate resources,” he said. “With that in mind, we will be heavily focused on building on the existing senior-level expertise and skills in our supervisory and policy teams during this year, which will be dedicated to us implementing group supervision.”

Consistent with the Authority’s risk-based approach to regulation, the scope of its group-wide supervision regime will initially apply to the jurisdiction’s Class 4 and Class 3B (re)insurers, the largest firms with the highest risk profiles. However it will be expanded in the future in line with changes in the international regulatory environment.

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