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Insurance Regulation – Where Is It Going?. Wednesday 24 th June 2009. Insurance Regulation – Where Is It Going?. Panel speakers Charles Collis, (Moderator) Partner Conyers, Dill & Pearman Shelby Weldon, Director, Insurance Licensing & Authorisation Bermuda Monetary Authority

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insurance regulation where is it going1
Insurance Regulation – Where Is It Going?
  • Panel speakers

Charles Collis, (Moderator)

Partner

Conyers, Dill & Pearman

Shelby Weldon,

Director, Insurance Licensing & Authorisation

Bermuda Monetary Authority

Richard Lightowler

Partner

KPMG Bermuda

Guy Soussan

Partner

Steptoe & Johnson – Paris and Brussels

insurance regulation in bermuda
Insurance Regulation in Bermuda
  • Bermuda Monetary Authority applies a risk-based approach to regulation
  • Ensures supervisory resources used efficiently and effectively, while placing appropriate amount of regulation on companies
  • Authority is committed to international regulatory standards, but ensures that Bermuda regulation remains practical for market as well as effective
  • Most recent Bermuda regulatory enhancements focused on commercial sector, e.g. Bermuda Solvency Capital Requirement

– In line with risk-based approach and goals re: mutual recognition (regulatory equivalence) for Bermuda internationally

bermuda framework enhancements and captives
Bermuda Framework Enhancements and Captives
  • Insurance Manager On-site Programme
    • Provides efficient means of supervising captive market via evaluation of captive manager compliance/effectiveness re: corporate governance and internal controls
    • In line with international standards of risk assessment and management
  • Class 3 Reclassification initiative
    • Segregation of Class 3 sector based on percentage of unrelated business and NPW; created new Special Purpose Insurer class
    • Supports effectiveness and further refines application and consistency of risk-based supervision of commercial insurers (Class 3A, Class 3B, Class 4), while maintaining appropriate oversight of captives
    • Class 3: captives writing >20% but <50% unrelated business NPW
  • Overall, changes firmly focused on higher risk commercial market - captive regime remains largely unchanged
active monitoring of international regulatory trends impact on captives
Active Monitoring of International Regulatory Trends – Impact on Captives
  • IAIS Captives Guidance Paper
    • Authority was a member of the IAIS Captive Guidance Paper Drafting sub-group, helped to finalise the IAIS Guidance Paper on the Regulation and Supervision of Captive Insurers
    • Bermuda’s regulation will remain broadly unchanged and not affected by this Guidance Paper
  • Solvency II Directive
    • Current proposal: captives writing <€5 million GPW to be within scope
    • Bermuda recommending that focus remain on commercial sector
    • Outcome remains to be seen; will seek to ensure that proportionality principles will apply in eventual Bermuda response
looking ahead
Looking ahead
  • Authority considers regime for Bermuda captives to be appropriate for risks inherent to sector

- Propose eventual analysis of existing captive regime to benchmark against current and developing international practices when they are clearer

  • Will continue to actively monitor developing international standards that may impact captives

- Goal is to be in position to proactively manage scope and nature of any changes that may be required

  • Focus for regulatory changes to remain on commercial (re)insurers – in line with global trends
    • Group supervision
    • Internal models
    • Market transparency: public filings, risk disclosure
    • Limited impact on Class 3 captives
  • Committed to maintaining right balance for Bermuda, and proportionality in applying regulation of captives
slide7
Solvency II on the Horizon

Impact on EU and Bermuda-domiciled Captives

Bermuda Captive Conference

June 21-24, 2009

* * * * * * * * * * * * * * *

Guy Soussan

Avocat (Paris and Brussels)

solvency ii and eu domiciled captives
Solvency II and EU-Domiciled Captives
  • General framework applies to all EU (re)insurers, including captives
    • Two levels of capital requirements
    • Risk management
    • Supervisory reporting and disclosure
  • Unless annual premium income is less than EUR 5 million
the need to address captives specificity
The Need to Address Captives Specificity
  • Lower capital requirements and operational costs 
  • Applying the principle of proportionality to captives
  • Technical measures reflecting specificity needed before 2012
solvency ii impact on bermuda captives
Solvency II Impact on Bermuda Captives

Bermuda captives covering EU risks

  • Not a Solvency II issue, BUT
  • Market access subject to individual Member States' approval
  • Setting up a separate EU captive to cover EU risks?
solvency ii impact on bermuda captives1
Solvency II Impact on Bermuda Captives

Bermuda captives covering EU domiciled cedants

  • Issue impacted by Solvency II
  • Cross border reinsurance generally allowed in all Member States
  • But conditions for reinsurance vary between Member States
gaining equal access to eu market
Gaining Equal Access to EU Market
  • Subject to recognition process by the EU
  • Bermuda supervisory and solvency standards for reinsurance must be deemed equivalent to Solvency II standards
  • Bermuda is actively working toward this recognition