June 2008. BERMUDA CAPTIVE CONFERENCE. Bermuda Captive Conference The Fairmont Southampton June 17 th 2008 CURRENT ISSUES & REGULATORY UPDATE. OPENING REMARKS Moderator: Peter Willitts, President, BIMA Topics to be Covered. BERMUDA CAPTIVE CONFERENCE.
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Bermuda Captive ConferenceThe Fairmont SouthamptonJune 17th 2008
CURRENT ISSUES & REGULATORY UPDATE
2008/09 Business Plan
Shelby Weldon & David Doyle
Required capital for unexpected losses
Expected losses recorded
in loss reserves
Beginning of year End of year
Regulators view unexpected adverse deviations as “RISK”
Capital is the buffer to absorb the shocks of unexpected adverse deviations.
Capital adequacy should be a function of a company’s risk-profile
As the Company’s risk profile increases, its capital requirement increases as well
Solvency and capital requirements are prescribed for all insurers under the Insurance Act 1978.
Therefore, an insurer writing property catastrophe lines of business would have the same level of required capital as an insurer writing auto liability if the two have the same premium volume and/or reserves.
Presently, the BSCR will be applied to the Class 4 Insurance market.
Calculate capital by estimating the unexpected adverse variance in net assets over a 1 year time horizon at a given risk measure.
The BSCR identifies 7 risk areas (fixed income investments, equity investments, interest rate/liquidity risk, premium risk, reserve risk, credit risk and catastrophe risk). Various capital charges are applied to these risk areas to derive required capital.
The information needed to populate the BSCR model is derived from the revised financial statements and Schedules II-VI.
BERMUDA ACCOUNTING DEVELOPMENTS designing a risk-based capital model that suited the Bermuda insurance market.
Captive Manager Onsite Inspections designing a risk-based capital model that suited the Bermuda insurance market.
OBJECTIVES: designing a risk-based capital model that suited the Bermuda insurance market.
OBJECTIVES cont’d: designing a risk-based capital model that suited the Bermuda insurance market.
METHODOLOGY: designing a risk-based capital model that suited the Bermuda insurance market.