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Multi-jurisdictional offshore law firm Conyers, Dill and Pearman has observed significant growth in Bermuda's insurance sector, with the addition of 53 new insurance companies; 27 of which were special purpose insurers, 9 long-term insurers and 17 general business insurers, and has recounted a number of legislative changes implemented during 2012 to strengthen the island's capital adequacy regime.
Conyers, Dill and Pearman attributed the marked growth to a reduction in annual license fees for Special Purpose Insurers from USD11,600 to USD6,000 and new provisions in the Insurance Amendment Act 2012 that further enhance the Bermuda Monetary Authority's (BMA) effectiveness as the territory's regulator, particularly in enforcement matters.
The firm pointed out a number of changes to Bermuda's legislative regime to secure Solvency II equivalence. The timing of Solvency II implementation has been delayed until at least 2015, in order for the European Insurance and Occupational Pensions Authority to conduct an impact assessment.
Listing changes introduced during 2012, Conyers noted the publication of the Insurance (Eligible Capital) Rules 2012, which became effective on January 1, 2013, applying to Class 3A, 3B, 4 and E insurers for year-end 2012 filings. The Rules define tiers of capital that are eligible for inclusion in an insurer’s available statutory capital and surplus and enhanced capital requirements.
During the year, the BMA also published new group solvency and supervision rules that apply wherever the BMA is acting as group supervisor of an insurance group headed by a Bermuda insurer. "Beginning in 2013, all insurance groups are now required to submit annual group financial statements (prepared on a General Accepting Accounting Principles- of International Financial Reporting Standards-basis), an annual group statutory financial return, an annual group capital and solvency return, quarterly unaudited group financial returns and an annual group solvency self-assessment," Conyers highlighted.
"While new enhanced capital requirements were originally due to come into effect for commercial long-term insurers and insurance groups in 2013, in November 2012, the BMA published a number of amendments to the individual company and group rules, the most significant of which involved the suspension of these enhanced capital requirements until 2014."
"While now required to submit a risk self-assessment return and file annual statutory returns electronically, Class 1, Class 2 and Class 3 general business insurers and Class A and Class B long-term insurers are not otherwise subject to Bermuda’s new regulations which impose enhanced reporting, governance and solvency requirements on Bermuda’s commercial insurers," Conyers stated.
The BMA has also recently published proposals in relation to the Insurance Economic Balance Sheet Framework for General Business Insurers as well as for Long-Term Insurers and continues to consider the minimum margin of solvency. According to Conyers, based on responses received to its consultation paper, the BMA now proposes to implement a minimum margin of solvency that would be equal to 25% of the enhanced capital requirement.
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