Bermuda insurers support international solvency standards

The Association of Bermuda Insurers and Reinsurers (ABIR) in a statement on January 28 to the International Association of Insurance Supervisors (IAIS) expressed its support for international solvency capital standards for insurers but noted that the risk based approach should build upon the extensive investment in regulatory systems already made by IAIS member jurisdictions such as Bermuda and recognize the unique features of each market.

“A group capital standard must be tailored to also reflect the capital needs of property casualty insurers including reinsurers. We would support a simple, minimum, base-line risk based capital measurement that provides an illustration of a group’s regulatory capital needs, affords a basis of comparison amongst international groups and focuses on a minimum or floor capital requirement that if breached would be the basis for regulatory discussion,” stated ABIR’s Senior Vice President and Deputy Director Leila Madeiros.  

While noting that the Bermuda Monetary Authority (BMA) has in place a group risk based capital system that serves as a model for an international standard, Ms. Madeiros noted: “We believe it is critical that the developers of the Basic Capital Requirement (BCR) design a system that distinguishes how risks are managed by property and casualty companies from life companies. Key to a property casualty formula is one that focuses on future underwriting risk and stress tests appropriate for the varied types of property and casualty business underwritten, including catastrophe risk.”

The IAIS work on BCR is critically important to global (re)insurers and although its initial use is for the Globally Systemically Important Insurers (G-SII’s) it may well become the baseline component of the Insurance Capital Standard (ICS) that will be more broadly applied to international insurance groups as part of the IAIS ComFrame project and may serve as the base for revisions of existing jurisdictional capital requirements. The latter is a serious concern since the timeline for development of the new capital standards is short.