This article introduces the new requirements applicable to the statutory financial statements. In particular, it highlights certain substantial changes affecting the Insurers registered under the Segregated Account Companies Act 2000 (SAC Insurers).
Pursuant to these regulatory changes Insurers are required to prepare financial statements under section 17A of the Act. These financial statements will be used as the basis on which statutory financial statements will be prepared under the new Insurance Account Rules 2016 (2016 Rules). The statutory financial statements will have to comprise statements both on unconsolidated and consolidated bases.
Pursuant to this new regulatory framework, Insurers are required to prepare unconsolidated statutory financial statements and income statements on a GAAP basis (adjusted by certain prudential filters and reserves), which are then used to produce the following documents:
Statutory balance sheet.
Statutory income statement.
Statutory statement of capital and surplus.
The information contained in the unconsolidated statutory financial statements will be used to determine the insurer’s:
Minimum solvency margin, being 25 per cent of an Insurer’s Enhanced Capital Requirement (ECR) as determined from the Economic Balance Sheet (EBS).
Liquidity ratio (if applicable).
Class of registration.
For insurers with subsidiaries consolidated in their GAAP financial statements, the Bermuda Monetary Authority (BMA) must be provided with the necessary information on an unconsolidated basis to assess the Insurers’ liquidity position, minimum solvency margin and insurer class without migration of the subsidiaries’ financials.