BMA Internal Capital Models Guidance
The Bermuda Monetary Authority has issued updated Guidance Notes to the Bermuda market for (re)insurers applying to use an internal capital model (ICM) for regulatory capital purposes. The revised Guidance Notes take into account results from the pilot ICM assessments the Authority conducted with selected firms in 2010, and recent international developments in this area.
Jeremy Cox, CEO of the Authority said, “For a number of years now the Authority has been focused on enhancing Bermuda’s insurance framework to maintain effectiveness, and in relation to achieving regulatory equivalence for this jurisdiction. The ICM framework is a key element of our regulatory change programme.”
“In revising our market guidance, further consultation with industry practitioners about the appropriateness of models in use within Bermuda, as well as the data from our pilot assessments, has been very valuable. We are continuing to move forward, and issuing this latest Guidance demonstrates the steady progress we are making in implementing our planned enhancements to the framework.”
The revised Guidance Notes update the original version the Authority issued in August 2009. The enhancements reflect emerging international best practice and standards in this area being set by bodies such as the International Association of Insurance Supervisors and are consistent with the provisions of Europe’s Solvency II.
Key enhancements include:
- expanding the scope of the ICM framework to include Class 4, 3B and 3A insurers
- an enhanced pre-application process, including the requirement of a model overview, an ICM
- demonstration and documentation gap analysis
- additional detail regarding the qualitative and quantitative information required from insurers
- regarding their models
Craig Swan, Director, Risk Analytics at the Authority, who oversees the internal models initiative added, “The revised Guidance now brings Class 3A insurers into scope within the framework. However, in accordance with the Authority’s risk-based approach to regulation, we will apply the ICM standards to such firms on a proportional basis. Additionally, after further policy development in 2011 the Authority intends to extend the ICM framework to Long-Term insurers, also ensuring that this is done proportionally.”
Enquiries about the Authority’s ICM application process or questions concerning the Guidance should be directed to the Authority’s Risk Analytics Department via email to Brant Kizer at bkizer@bma.bm and Navid Zarinejad at nzarinejad@bma.bm.
