bermuda monetary authority 1 business plan 2012 publishes 2012 business plan.pdf · the bermuda...
TRANSCRIPT
The Bermuda Monetary Authority (BMA) is the integrated regulator of the financial services
sector in Bermuda.
Established under the Bermuda Monetary Authority Act 1969, the BMA supervises,
regulates and inspects financial institutions operating in or from within the jurisdiction.
It also issues Bermuda’s national currency; manages exchange control transactions;
assists other authorities in Bermuda with the detection and prevention of financial
crime; and advises the Government and public bodies on banking and other financial
and monetary matters.
The Authority develops risk-based financial regulations that it applies to the supervision
of Bermuda’s banks, trust companies, investment businesses, investment funds, fund
administrators, money service businesses and insurance companies.
It also regulates the Bermuda Stock Exchange (BSX).
The Authority has regulatory responsibility for a market that comprises an investment
funds sector with an aggregate Net Asset Value of $178 billion; a banking sector with total
assets of $23 billion; the BSX with total market capitalisation of over $319 billion; as well
as over 1,200 companies in Bermuda’s insurance market with total assets in excess of
$496 billion, a market that wrote $120 billion in gross premiums.
See www.bma.bm for more information about the BMA and the Bermuda market.
Bermuda Monetary Authority 1
Section One Introduction 02
Section Two Commitment to Delivering Quality Supervision 04
Section Three International Developments 14
Section Four Focus on Operational and Cost Efficiencies 15
Business Plan 20122 Section One
Introduction
I am pleased to present the Authority’s
2012 Business Plan, my third as Chief
Executive Officer. Though several
elements of the plan will be familiar as
a result of work streams commenced in
prior years, I should point out that the
strategic intent of this latest edition has
changed significantly.
The 2012 Business Plan signals a
departure from previous plans in that
it heralds a new phase of supervision,
one that marks a shift from policy
development to implementation. This
ranges from enhanced insurance
supervision, to the completion of major
initiatives in the banking sector and a
proposed regime for corporate
service providers.
On the insurance side, attention will
be focused on the framework for group
supervision, which will be applied
to Class 4 and Class 3B companies
during 2012, ahead of the groups
regime becoming effective on 1st
of January 2013. This follows the
completion in 2011 of enabling legal
and infrastructural measures for group
supervision, along with pilot reviews,
trial runs and the identification of over
20 insurance groups for which the
Authority will be Group Wide Supervisor.
In tandem with this work, the Authority
will provide guidance to the market
regarding how it plans to lead and
participate in supervisory colleges,
which will become an increasingly
important forum for our interaction with
other international regulators in the
months ahead.
Indeed, the importance of such
interaction to the success of group
supervision cannot be over-emphasised.
Given the number of meetings that
have already taken place between
the Authority’s supervisors and their
European counterparts, I believe solid
foundations have been laid that will
help underpin the working relationships
considered by many to be a pre-requisite
to effective group supervision.
Among other developments planned
for the insurance sector in 2012 are
proposed changes in captive reporting
requirements as well as an extension
of GAAP reporting requirements to
include Class C and Class D Long-Term
Bermuda Monetary Authority 3
companies for year-end 2012 filings. The
Authority also aims to finalise its plans for
group supervision of the Long-Term sector
during 2012.
In the banking sector, the Authority
will continue to work towards the
development of specific proposals for
the application of Basel III in Bermuda.
Additionally, banking intervention powers
will also be advanced during 2012,
with provision of the required statutory
measures enabling Bermuda’s authorities
to intervene promptly to deal with
problem banks and to protect depositors.
The Corporate Service Provider Business
Act, a new regime for the prudential
regulation and oversight of corporate
service providers, was proposed by the
Authority in 2011 and will be the subject
of market consultation during the
coming year.
In terms of the Authority’s capabilities,
the Business Plan makes clear that we
will continue to focus on operational and
cost efficiencies while providing an IT
infrastructure that enables us to deliver
quality supervision.
Quality supervision will remain a critical
objective in 2012. While the challenge
of change is evident on every page of
the Business Plan, the Authority has
no intention of changing its focus on
providing the kind of quality supervision
that works for Bermuda. In this regard,
the Authority is particularly pleased
with preliminary guidance indicating
that the unique characteristics of
Bermuda’s insurance industry are likely
to be recognised and accommodated
under Europe’s Solvency II Directive.
This is an important aspect of our quest
for Solvency II equivalence. While we
are committed to ensuring we achieve
consistency with international standards,
we do not intend to simply duplicate
them and apply them here. Instead, our
policy is always to adapt such standards
appropriately to take account of the
nature of the business conducted in
our jurisdiction.
As with any exercise concerning future
developments, the Authority’s Business
Plan is premised on certain assumptions.
Not the least of these is the assumption
that we will continue to attract and retain
the talent that will enable us to deliver
the supervisory product expected of us.
While competition for talent remains one
of our toughest challenges, I am confident
that with our existing high level of human
capital and the support of the markets
we supervise, we will continue to provide
the high level of superior service that is
only ever possible from a committed and
motivated professional workforce such
as ours. I am honoured to be able to call
them colleagues and privileged to be
allowed to lead them and the Authority in
the execution of our 2012 Business Plan.
Jeremy CoxChief Executive Officer
Business Plan 20124 Section Two
Commitment to Delivering Quality Supervision
The Authority will enter a new phase
of supervision in 2012. We will shift
significantly from policy development
to implementation for our enhanced
supervisory regimes for insurance,
and complete some major initiatives in
relation to the banking sector. We will
also propose enhancements to reporting
requirements for the captive sector
as part of overall refinements to our
regimes. In addition, we will advance
work towards both introducing a new
supervisory regime for Corporate Service
Providers and enhancing the Authority’s
enforcement regime across all sectors of
the financial services market.
Our priority throughout the
implementation process is a
commitment to delivering quality
supervision. We intend to meet that
commitment by using our skilled and
enhanced technical teams effectively
while applying pragmatic, balanced
supervisory programmes. This is core to
Summary of Supervisory Initiatives 2012
Banking and Investments
• Basel III Consultation • Bank Liquidity Policy• Corporate Governance Code for
banks and investment funds• Bank Intervention Powers• Deposit Insurance Scheme
assistanceOther
• Corporate Service Providers Regime
• Enhanced Enforcement Regime• AML Regime Review
Insurance
• I nsurer Solvency and Supervisory Review
• Group Supervision• Disclosures and Transparency• Enhanced Long-Term Supervisory
Regime• Internal Capital Models• Captive Risk Return
Bermuda Monetary Authority 5
our responsibilities as the regulator of
Bermuda’s financial markets. We will
also ensure that Bermuda’s regulations
balance prudential considerations and
alignment with international standards
with business efficiency.
Insurance Supervision – Moving Forward with Regime ImplementationThrough 2012, work will continue to
implement the policies developed in
2011 to ensure the Authority remains
an effective, risk-based regulator for
the insurance sector. Highlights of our
next phase of enhancements for the
commercial insurance sector’s supervisory
toolkit, i.e. Class 4, Class 3B, Class 3A and
Classes E, D and C Long-Term firms, follow.
Insurer Solvency
Our work on enhancing Bermuda’s
solvency regulations for the insurance
sector has been the cornerstone of policy
and supervisory regime development over
the past three years. Having introduced our
enhanced standard capital model – the
Bermuda Solvency Capital Requirement
(BSCR) - initially for application to Class
Highlights of Insurance Capital Adequacy Framework Changes
Bermuda Solvency Capital Requirement (BSCR) – standard capital model
Economic Balance Sheet
Commercial Insurers Solvency Self-Assessment (CISSA) - Bermuda-specific ORSA process
Quarterly Financial Return
Eligible Capital
• Full implementation for Class 3B insurers as well as Class 4 firms
• Continued phased implementation of refined model for Class 3A and Class E firms for year-end 2011 filings; and to Class C and Class D for 2012 year-end
• Trial run for Class C and D insurers in Q2
• Group BSCR filing for Class 4 and Class 3B groups; trial runs for Class 3A and Class E
• Consultation Paper to be issued by Q2 with proposals for implementation with respect to Long-Term and General Business
• The Authority will begin to review CISSAs in 2012 for year-end 2011 filings from Class 4, 3B, 3A and Class E firms
• The Quarterly Financial Return will be a new filing for May, August and November 2012. It will comprise unaudited financial statements, intragroup transactions and risk concentrations. This requirement will apply to Class 4 and Class 3B insurers.
• Revised Rules effective 1st January 2013 for most classes of insurers.
Component Developments for 2012
Business Plan 20126
4 firms, and subsequently to Class 3B
insurers, we will continue phased roll out
to the rest of the commercial market. This
will also apply to other elements of the
enhanced solvency framework.
Group Supervision
Work during 2011 focused on putting
final elements of the policy and
legislative infrastructure in place for
group supervision. A key element of this
work included issuing the Insurance
(Group Supervision) Rules 2011 as
well as the Insurance (Prudential
Standards) (Insurance Groups Solvency
Requirement) Rules 2011. The Authority
also identified over 20 insurance groups
for which the BMA will be the Group Wide
Supervisor (GWS). We also piloted a trial
run of the Groups BSCR with Class 4 and
Class 3B insurers.
In 2012, the focus will be on preparing
for full implementation of the supervisory
review process for Bermuda’s insurance
groups beginning 1st January 2013.
The platform is set for moving forward in
this regard: group solvency and financial
reporting requirements are in place; we
have established group-specific on-site
processes; and we will apply the framework
fully to Class 4 and Class 3B groups
incorporating insights gained from the trial
run and group on-site pilot reviews.
Holding supervisory colleges with fellow
regulators will remain an important
element of our work. We will use such
colleges to review and assess insurance
groups. This will cover financial soundness
and capital adequacy; group corporate
governance; risk exposures and
concentration; intra-group transfers; and
risk management and internal controls.
We are establishing formal governance
processes for supervisory colleges that the
Authority will host, to ensure clarity for all
participants. These governance processes
will include the use of memoranda
of understanding and confidentiality
agreements, as well as rules of
engagement for decision-making, dispute
resolution and supervisory coordination.
Our work during 2012 will also include a
phased trial run of the Groups’ BSCR with
insurance groups that include large Long-
Term (Class E) insurers, and Class 3A firms
that meet the Authority’s criteria for a group
as outlined in Section 27B of the Insurance
Act 1978. We will also communicate to the
market in the first half of the year regarding
how the Authority will lead and participate
in supervisory colleges.
Insurance group reporting requirements
will take effect for the 2011 year-end;
however, transitional arrangements will
be in place for firms to reach compliance
with other aspects of the group supervision
regime by the time they become effective
on 1st January 2013.
Additional Framework Enhancements
Consistent with the Authority’s overall
commitment to ensure Bermuda’s
framework remains aligned with relevant
international standards, and based on the
European Insurance and Occupational
Pensions Authority’s (EIOPA) recent
Solvency II assessment, we are proposing
specific additional enhancements to our
commercial insurance framework.
We are currently in consultation with the
commercial market on these additional
proposals, which focus on:
• the independence of the internal audit function;
• removing the ability to co-mingle Long-Term and General Business activities
Bermuda Monetary Authority 7
written on a direct basis; • the segregation within an entity of
insurance and non-insurance business;• new licensing requirements;• minimum solvency measures; • solvency reporting and disclosure; and • new material change notifications.
Post-consultation, we will develop
supporting legislative changes. We plan
for these proposals to be effective as of
January 2013.
Insurance Company Disclosures
and Transparency
Effective year ended 31st December
2011, Class 3A and Class E Long-Term
insurers will be required to produce publicly
available GAAP financial statements. This
follows on from similar requirements
for Class 3B and Class 4 insurers that
became effective for year-end 2010 filings.
We plan to extend this requirement to Class
C and Class D Long-Term firms for year-end
2012 filings.
This work completes Phase 1 of our
disclosures and transparency initiative.
Phase 2 (reporting periods 2012 to 2014)
and Phase 3 (reporting periods 2015
and beyond) will be primarily dedicated
to requiring public disclosures that are
consistent with both prevailing international
standards and market conditions. As we
enter Phase 2 in 2012, we will review the
effectiveness of our public disclosures and
propose appropriate enhancements.
BSCR Impact Assessments
The Authority will also seek voluntary
participation from firms for capital
requirement impact assessments
in 2012. This work will assist with
determining how best to transition from
statutory accounting to a GAAP basis
for regulatory capital purposes within
Bermuda’s framework, and how to
appropriately incorporate an economic
balance sheet requirement. It will also be
helpful in enhancing the existing risk-
sensitivity built into the BSCR model.
Enhanced Long-Term
Supervisory Regime
The Authority completed the process to
reclassify Bermuda’s Long-Term insurance
sector into Classes from A through to E
in 2011. This reclassification process
was designed to ensure such firms are
appropriately supervised within the
Authority’s enhanced risk-based framework.
We also conducted a trial run in 2011
of BSCR filings for Class E insurers, as
a precursor to phased implementation
overall for the Long-Term sector. Phased
application of the BSCR for Class E insurers
will take place in 2012, along with trial runs
for Class C and Class D firms. The trial run
will also cover CISSA, eligible capital and
disclosure requirements.
As part of the trial run, the Authority issued
a Group Supervisor Questionnaire to gather
information to determine the Long-Term
firms for which the Authority may assume
responsibility as GWS. We will complete
assessing the market’s responses to this
survey in 2012 to assist with finalising our
plans for group supervision of the Long-
Term sector.
Internal Capital Models
The Authority recognises the complexities
involved in the development of internal
capital models (ICMs), and the significant
time and resources required to ensure
that the review and evaluation of such
models is effective for both the regulator
and the market. In 2011, the Authority
made further progress in the development
and implementation of its framework
Business Plan 20128
through issuing revised Guidance Notes,
conducting a pilot review of a Long-Term
insurer and holding discussions with
individual insurers interested in applying
to use an ICM for regulatory
capital purposes.
In 2012, the Authority will continue
towards full implementation of the
framework by providing further guidance
to the Long-Term sector, enhancing the
ICM Review Process and developing
additional resources to conduct
reviews. The Authority will also engage
in discussions and seek to coordinate
activities with other regulatory agencies in
preparation for Group ICM reviews.
Captive Risk Return
While we have focused our framework
enhancements on the commercial market
in recent years, the Authority is now
proposing refinements to our captive
sector regime to ensure it remains
effective and appropriately consistent
with international standards.
We are proposing enhancements to
reporting requirements for captives, i.e.
General Business Classes 1, 2, 3 and
Classes A and B Long-Term firms through
a new Risk Return. The Risk Return
will include an own risk and solvency
assessment - appropriately modified to
reflect the limited purpose and lower risk
profile of captives.
Internal Capital Models Developments
• Pilot reviews with General Business and Long-Term insurers
• Enhanced ICM qualification process, including development of ICM information requests and internal scoring mechanisms
• Expanded pre-application process
• Revised ICM Guidance Notes to include enhancements to review process and extension of scope to Class 3B and Class 3A firms
• ICM analysis and assessment internal training programme
• ICM review business model finalised
• Review of ICM Guidance Notes to extend scope to Long-Term insurers
• Work with insurers interested in ICM application, including potential pilot review activity for various risk modules
• Internal planning and resource development
• Coordination with other regulatory agencies in preparation for Group ICM reviews
• Finalisation and communication of full implementation timeframe
2012 InitiativesCompleted To Date
Bermuda Monetary Authority 9
This Risk Return will be combined with
existing submissions in one consolidated
annual filing with the Authority,
enhancing the efficiency of the annual
reporting process.
The enhanced reporting will ensure
that captive firms remain appropriately
classified and supervised within our risk-
based framework.
Market consultation on this proposal is in
progress and the Authority will consider
feedback received and the results of a
trial run in finalising the enhancements in
2012. The Authority intends to make these
refinements in a proportionate manner that
ensures that Bermuda’s captive regime
remains fit for purpose, practical and
appropriate.
Banking Supervision – Basel III and BeyondPreparing for Basel III
Basel III is the name given to the revised
set of bank capital standards adopted by
the international banking regulators that
are members of the Basel Committee
on Banking Supervision. In 2012, the
Authority will consider the scope of Basel III
implementation in the Bermuda market.
We have already begun discussions with
the market in this regard, setting out
initial proposals in a Discussion Paper
entitled ‘Implementation of Basel III in
Bermuda’ at the end of 2011. Market
consultation will continue into 2012,
along with our on going monitoring of
international developments on Basel III as
we work towards establishing more specific
proposals for its application in Bermuda.
Bank Liquidity Policy
Our review of the Authority’s existing
liquidity policy for banks began in 2010
and included the release of “Principles
for Sound Liquidity Risk Management
and Supervision” in December 2010.
During 2011 the Authority collected data
on banks’ liquidity risk management
practices through an industry self-
assessment process and assessed
banks’ compliance with the liquidity risk
management principles.
In 2012 we will continue our reviews to
ensure that banks have specific action
plans in place to achieve compliance. We
will continue to review our standards in
light of market consultation and the latest
guidance from the Basel Committee on
liquidity risk management.
Bank Intervention Powers
During 2011, the Authority published
a Consultation Paper on ‘Banking
Intervention Powers’. In 2012, the Authority
will work with industry to finalise the
legislative framework for this initiative,
specifically, development of the Banking
(Special Resolution Regime) Act. The
Act will provide the required statutory
provisions to enable Bermuda authorities
to intervene promptly in order to deal with
problem banks and protect depositors. It
is envisaged that this legislation will be
presented to Parliament in 2012.
Deposit Insurance Scheme (DIS)
In 2011, the Bermuda Government
enacted the Deposit Insurance Act 2011
to prepare the way for implementing this
important consumer protection initiative.
The primary objectives of the deposit
insurance scheme (DIS) are to protect
small depositors and support continued
stability in Bermuda’s financial system
and economy.
Business Plan 201210
As a starting point for establishing the
DIS, the maximum coverage amount
per depositor, per institution will be
$25,000. The Scheme will be funded by
mandatory contributions (premiums) from
all of Bermuda’s banks, as compulsory
participation is an internationally-adopted
practice for such schemes and promotes
comprehensive protection for depositors.
In 2012, the Authority will continue
to assist the Ministry of Finance with
establishing the Deposit Insurance
Corporation (DIC). The DIC will be the
independent statutory body that will
administer the DIS in Bermuda.
Corporate Governance Code
Market consultation is in progress on
the Authority’s proposals to introduce
a Corporate Governance Code for
Bermuda’s banks.
We issued a Consultation Paper at the
end of 2011 proposing 13 principles
and related guidance that reinforce key
elements of corporate governance that are
already generally accepted and established
by banks in Bermuda. The issuance of a
Code will reinforce these sound practices
and provide banks with detailed guidance
on risk management and corporate
governance practices and compliance
with minimum licensing criteria. After
completing consultation with the market,
the Authority will assess feedback received
in order to issue the final Code by end
2012. We intend to consult on extending
the principles established in the Corporate
Governance Code to other financial
services sectors as part of our policy work
in 2012.
Asset Management DevelopmentsWe will also continue to provide input to
market deliberations during the year on
further development of Bermuda’s asset
management sector. Our participation
is to ensure that information from the
regulatory perspective remains a key
part of such developments.
This work is also designed to ensure
that all parties involved, from the
Authority to industry to the Bermuda
Government, take into account both
potential framework enhancements
within Bermuda as well as the impact of
international developments, e.g. Europe’s
Alternative Investment Fund Managers
Directive, and global regulatory measures
being promulgated by the G20 and the
Financial Stability Board.
In 2011 we released a Consultation Paper proposing the prudential regulation and oversight of corporate service providers (CSPs). Establishing such a regime for CSPs would support appropriate supervisory monitoring of this business in Bermuda, while also accommodating the market’s ability and desire to provide such services within the jurisdiction.
We have subsequently issued, for market consultation, draft legislation to facilitate this regulatory oversight - the Corporate Service Provider Business Act 2011. This legislation reflects the long-standing regulatory powers and includes, among other provisions, proposed licensing criteria and reporting requirements for CSPs.
Corporate Service Provider Regime
11Bermuda Monetary Authority
A successful outreach campaign, which continued throughout 2011, has resulted in improved awareness among industry regarding requirements and obligations under Bermuda’s AML/ATF regime. Extension of the on-site programme to support AML supervision during the year also contributed to this higher awareness. The Authority conducted 21 on-site visits in 2011– covering firms in the trust, investment, banking, money service business, and fund administration sectors. In addition, the Unit’s development and maintenance of the non-licensed persons register continues with some 453 institutions currently registered.
The next International Monetary Fund (IMF) review of Bermuda’s AML regime is currently scheduled for early 2014. In 2011, as a part of preparations for the IMF visit, the Authority commissioned an effectiveness review of the regime and compliance levels among Bermuda’s AML-regulated financial institutions in relation to the Financial Action Task Force (FATF) 40+9 recommendations for AML regulation. The report from this initiative is due early in 2012 and its recommendations will assist with applying further refinements to the AML regime during the year as deemed necessary.
The Authority will enter a new phase of AML supervision in 2012. We will conduct industry-specific desk-based reviews during the year. The desk-based reviews will require examination using a risk-based approach of the
AML/ATF policies and procedures of companies in the trust, fund and fund administration, and NLP sectors. This will enable us to direct an element of the resources in our AML/ATF Unit to provide additional technical support to the supervisory teams within the Authority, and ensure training sessions are provided as required. There will also be a greater role for this Unit with respect to supporting general enforcement within the Authority, including refinement of the enforcement process. The Unit will also provide research and direction from the AML perspective, as required, to the supervisory teams who may be considering passing deficiencies they identify within firms to the Enforcement Committee for possible action.
Work has begun to finalise market-specific guidance around AML/ATF, most recently for the trust, investment business and funds sectors. This will be part of a general review we plan to conduct during 2012 of current AML/ATF legislation and guidance notes with a view to updating these framework components as necessary by year-end.
Following the success of the series conducted in 2011, the Authority will also continue to conduct industry outreach seminars during 2012. Areas of focus will include themes arising from the desk-based reviews and the implications of anticipated amendments to the FATF global AML standards. With respect to the sanctions regime, the Authority will document the
oversight framework and communicate our findings to industry. It is also important to note that in addition to our supervisory efforts, this work includes continuing long-standing and effective collaboration with our colleagues in the Bermuda Government - specifically, at the Ministry of Finance, the Ministry of Justice, the Financial Intelligence Agency and the National Anti-Money Laundering Committee.
EnforcementThe Authority continues to make progress with plans to enhance our enforcement framework, to ensure Bermuda remains appropriately aligned with international standards. We completed market consultation on proposals to extend the scope of our enforcement powers to all sectors within Bermuda’s financial services industry in 2011. Following a review of the comments received from this consultation, in 2012 we intend to publish a Statement of Principles and to amend the primary legislation for the insurance, banking, investment, and trust sectors to ensure a uniform set of enforcement powers are available to the Authority across all sectors.
Anti - Money Laundering/Anti - Terrorism Financing Supervision and Enforcement
12 Business Plan 2012
Econ
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20
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Bermuda Monetary Authority 13
Q1
Q2
Q3
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2012
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Business Plan 201214
International Developments
Section Four
International regulatory initiatives continue to reshape the global regulatory landscape across sectors. These initiatives impact regulators on the jurisdictional level who must balance maintaining regimes that are in line with evolving international standards and also appropriate for local markets.
The Authority will continue to contribute to this on going change process in a substantive way. Along with being keenly aware of the continuing debates on regulatory reform, we remain involved in the work of international standard setters across all financial sectors, in particular with the International Association of Insurance Supervisors (IAIS), through our committee membership. Our appointment in November 2011 to the Chairman position of the IAIS’s Macroprudential Policy and Surveillance Working Group is the most recent example of our contribution to the insurance standard setter’s work. Within the funds
and banking sectors we remain active members of the International Organisation of Securities Commissioners and the Offshore Group of Banking Supervisors, attending regular meetings to discuss and act upon issues relevant to these sectors. This activity will continue in 2012.
As regards supervisory cooperation, we continue to view establishing relationships with our peer regulators as key to fostering high standards in regulation. As such we will consider how best to engage in and maintain such relationships, e.g. possibly building on the number of MOUs that we have signed, which was a total of 18 as of 2011. This includes our most recently signed Multilateral MOU (MMOU) with the Caribbean Regional Regulatory Authorities in May 2011. We will also continue to participate as a member of the IAIS MMOU Signatories Working Group, the group that evaluates countries’ applications to be part of the IAIS MMOU.
Also during 2012 we will continue our international advocacy work, which is focused on effectively communicating the near- and long-term vision of regulation and supervision in Bermuda to relevant external stakeholders. This will include maintaining dialogue with EU and US supervisors and key decision-making bodies. These groups include EIOPA (the European Insurance and Occupational Pensions Authority), the body that conducted our third-country Solvency II equivalence assessment in 2011.
Our varied involvement in the international arena is a key part of our regulatory strategy and supports our goal to be recognised as a leading risk-based financial services regulator. It also allows us to create awareness of the efforts Bermuda is undertaking to develop a first class regulatory framework that can be deemed equivalent by major jurisdictions.
Highlights - Initiatives for International Developments 2012
International Cooperation
Advocacy
Supervisory Cooperation
• Assume Chairmanship of IAIS Macroprudential Policy and Surveillance Working Group, with a focus on global standards for stress testing
• Represent Bermuda at the Financial Stability Board Regional Consultative Group for the Americas
• Continue to provide the Authority’s expertise for training supervisors overseas, to assist with raising the standard of supervision globally
• Continue outreach and awareness-raising programme to key stakeholders overseas to support Bermuda’s standing as a leading financial jurisdiction
• Maintain engagement with relevant European authorities, to support Solvency II equivalence programme, and regulatory bodies in the United States in relation to initiatives relevant to Bermuda
• Continue hosting and participation in supervisory colleges for banking and insurance sectors; in particular, launch colleges as Group-wide Supervisor for identified insurance groups
Bermuda Monetary Authority 15Section Four
Focus on Operational andCost Efficiencies
Resources
During 2012, the Authority’s priorities in regard to augmenting resources in a cost-effective manner will be to:
• continue to resource the Authority with quality staff;
• embed a robust technical competencies regime to ensure learning and development programmes continue to provide quality supervisors; and
• continue to control expenses and achieve further efficiencies in both our internal and external processes.
In 2010 our resourcing strategy included an aggressive recruitment drive to attract key, senior-level individuals to join our policy, risk analytics and supervisory areas, with most of the successful candidates being in place by early 2011. This targeted growth in resources continues and is supporting the development and implementation of our enhanced regulatory policy and supervisory programmes. We accomplished this against the backdrop of a competitive recruitment environment within the global regulatory arena that has regulators seeking to acquire employees with experience relevant to
new regulatory rules, such as Solvency II, from a limited talent pool.
Moving forward, the next phase of our strategy involves maximising efficiencies in our processes as well as leveraging skill-sets and deepening the technical abilities of our team. This work will involve employing hybrid resourcing models, such as co-sourcing arrangements. Co-sourcing is an approach being adopted by most international regulators to meet ever increasing demands for specialised resources. Such arrangements, which typically use external resources for defined periods of time, will allow the Authority to meet immediate resource needs in a cost-efficient manner. We will deploy this arrangement, for example, for our internal model reviews and during peak supervisory periods such as with the review of Statutory Financial Returns. In addition, the Authority remains committed to developing our human capital. During 2012 we will expand and strengthen our leadership development framework by introducing executive coaching. We will also implement the next phase of our technical competencies framework that was introduced in 2011 for our
supervisory units. The framework supports supervisory excellence by ensuring that our teams of supervisors have the appropriate skills, knowledge and expertise to perform their roles effectively. Our work in 2012 will include embedding the framework across our supervisory functions, including learning and development, recruitment and performance management. In this way the Authority is building its technical resources to ensure we have the right people with the right skill-sets to perform our duties as Bermuda’s financial services regulator to the highest standard.
Information Technology
The Authority recognises the important role technology plays in supporting effective supervision, particularly in today’s environment where reporting and regulatory oversight requirements are becoming more complex. With this in mind, implementation of our IT strategy continues. This strategy is designed to ensure that a robust IT infrastructure supports our work to deliver quality supervision. We are ensuring that this infrastructure aligns with the sophisticated nature of the markets we regulate, and provides us
Business Plan 201216
with the ability to adjust to supervisory needs, now and into the future.
During 2011, we met major milestones within our IT plan, particularly with respect to the Authority’s e-filing capabilities. Our focus in 2012 will be to continue developing and deploying our supporting system for e-filing – ERICA (Electronic Regulatory Information Compliance Application). ERICA is a secure web portal that receives, tracks, and processes regulatory filings, material changes and other types of submissions regulated firms make to the Authority. Using the programming language XBRL (extensible Business Reporting Language), ERICA will streamline the reporting, collection and analysis of data for regulatory purposes. This will result in significant efficiencies internally, within our supervisory processes, while making it easier for external firms to be in compliance with the enhanced reporting requirements.
In 2011, we applied our e-filing capabilities to the investment funds sector. In 2012, we will expand these capabilities across the banking and insurance sectors for all compliance
submissions including Prudential Information Returns and Statutory Financial Returns respectively. In addition, we will extend the electronic submissions related to the Bermuda Solvency Capital Requirement, which the Authority introduced in 2010 for Class 4 firms and 2011 for Class 3B insurers, to firms in the remaining applicable insurance classes, including insurance groups. This will bring greater efficiencies in solvency assessments of firms.
The Authority is committed to being at the forefront of technological advancement to enhance regulation and supervision. The effective management of information is a common challenge regulators face worldwide due to the rapid changes occurring within financial regulation in response to the financial crisis. Therefore, during 2012 we will enhance our information management framework using the capabilities afforded through ERICA. These efforts support our commitment to effective supervisory cooperation which is a critical factor in strengthening regulation globally.
Currency Activities
Having successfully introduced a redesigned, award-winning banknote series with enhanced security features two years ago, the Authority will begin the process of demonetising Bermuda’s legacy banknote series in 2012.
Demonetisation is essentially the process whereby the Authority begins ‘calling-in’ currency that will eventually become outdated. As with our previous demonetisation initiatives, once the process for the current legacy note series officially begins, the Authority will no longer release such banknotes for public consumption. The legacy currency will cease to be legal tender after the process is complete. The Authority will announce the details and timeline for this demonetisation process early in 2012. For the general public, this will mean that from 2012 onwards a declining number of legacy banknotes will be in circulation.
Meeting Service Standards The Authority remains committed to transparency in the work we do and to
Bermuda Monetary Authority 17
Transaction
Corporate Registrations:
• Company incorporations • Listed (stock exchange) company
incorporations • Permit companies • Partnerships • Issues and transfer of shares
Investment Fund Applications:
Insurance Licensing and Authorisations1:
• 2010 Class 4 company Statutory Financial Returns
• 2010 Class 3B and Domestic2 Insurance Company Statutory Financial Returns
• 2010 Class 3, 3A and Long-Term company Statutory Financial Returns
• 2010 Class 1 and 2 company Statutory Financial Returns
•Registrations
•Certificate of Compliance
Service Standard
90% of applications within:
24 hours1 hour
2 days2 days2 days
Process and approve 90% of applications for new funds or material changes within 6 business days
100% to be completed by June 1st 2011
100% to be completed by July 1st 2011
100% to be completed by December 31st 2011
100% of companies in risk-based sample to be completed by December 31st 2011
90% to be completed in 3 business days
90% to be completed in 2 business days
2011 Performance
Met
Met: 96%
Met
Met
Met
Met
Met: 96%
Met: 96%
TABLE 1: BMA Performance against 2011 Service Standards
1These service standards were set for year-end 2010 filings of Statutory Financial Returns (SFRs). Companies submit SFRs on a staggered basis throughout the year following the financial year-end. The initial submission deadline for 2010 SFRs was April 2011. In keeping with the BMA’s risk-based approach, SFRs for Class 4 companies were reviewed first. An SFR review involves receiving the Return and conducting a financial analysis of its contents, as well as an assessment of the accuracy, completeness and fairness of each submission. Based on this review firms are subsequently contacted to confirm either that the Authority is satisfied with the SFR or that more information or action in relation to a submission is required, which could include meetings with company management.
2Separate service standards are set for Class 3B and domestic insurance companies in keeping with their risk profile.
Business Plan 201218
Transaction
Corporate Registrations:
• Company incorporations • Listed (stock exchange) company
incorporations • Permit companies • Partnerships • Issues and transfer of shares
Investment Fund Applications:
Insurance Licensing and Authorisations3:
• 2011 Class 4 company Statutory Financial Returns
• 2011 Class 3B and domestic
insurance company Statutory Financial Returns
• 2011 Class 3, 3A and Long-Term company Statutory Financial Returns
• 2011 Class 1 and 2 company Statutory Financial Returns
• Registrations
• Certificates of Compliance
Service Standard
90% of applications within:
24 hours1 hour
2 days2 days2 days
Process and approve 90% of ap-plications for new funds or material changes within 6 business days
100% to be completed by June 1st 2012
100% to be completed by July 1st 2012
100% to be completed by December 31st 2012
100% of companies in risk-based sample to be completed by Decem-ber 31st 2012
90% to be completed in 3 business days
90% to be completed in 2 business days.
Table 2: BMA Service Standards Targets 2012being accountable for the level of service we provide to the Bermuda market. For the third consecutive year, we set service standards for regulatory transactions that various departments conduct with the wide range of entities and financial institutions under our remit. Table 1 shows that the Authority has met all of the targets set for our service standards over the past year. For 2012, we have set such targets as outlined in Table 2.
3 These service standards are set for year-end 2011 filings of Statutory Financial Returns (SFRs). Companies submit on a staggered basis throughout the year following the financial year-end. The initial submission deadline for 2011 SFRs is April 2012.
Bermuda Monetary Authority 19
BMA Management Team – January 2012
Jeremy Cox Chief Executive Officer Bradley Erickson Chief Operating Officer
Banking Trust & Investment (BTI) Marcia Woolridge-Allwood Director Tamara Anfossi Assistant Director, BTI Financial Institutions & Investment Funds Courtney Christie-Veitch Assistant Director, BTI Financial Groups
Corporate Finance Terry Pitcher Head of Finance
Corporate Governance and Communications Pat Phillip-Bassett Deputy Director, Corporate Governance & Communications
Human Resources Mesheiah Crockwell Head Of Human Resources Verna Hollis Smith Assistant Director, Organisation Management
Insurance Licensing & Authorisation Shelby Weldon Director Leslie Robinson Assistant Director, Licensing
Insurance Supervision, Complex Institutions Shanna Lespere Director Niall Farrell Deputy Director, Run-off & Monitoring Diana Nedvidek Deputy Director, Insurance Supervision, Complex Institution s Laila Burke Assistant Director, Insurance Supervision, Complex Institutions Gerald Gakundi Assistant Director, Insurance Supervision, Complex Institutions Susan Molineux Assistant Director, Insurance Supervision, Complex Institutions Sonja Nauta Assistant Director, Insurance Supervision, Complex Institutions Suzanne Williams Assistant Director, Insurance Supervision, Complex Institutions
Legal Services & Enforcement Shauna MacKenzie Director Thomas Galloway Senior Legal Counsel Dina Wilson Assistant Director, Legal Services & Enforcement
Management Services John Dill Director Howard Ho Assistant Director, IT Austin Culmer-Smith Assistant Director, Corporate Operations
Policy, Research & International Affairs Mary Frances Monroe Director Marcelo Ramella Deputy Director, Research & International Affairs Arhat Virdi Assistant Director, Policy
Risk Analytics Craig Swan Director David Theaker Deputy Director, Actuarial Services Andreas Jobst Assistant Director, Chief Economist David Kaniaru Assistant Director, Analytics, Insurance Brant Kizer Assistant Director, Actuarial Services, Property & Casualty Richard May Assistant Director, Actuarial Services, Long-Term Gina Smith Assistant Director, Actuarial Services, Property and Casualty Gary Thomas Assistant Director, Actuarial Services, Long-Term Navid Zarinejad Assistant Director, Actuarial Services, Property and Casualty
Senior Advisors Graeme Dargie Senior Advisor - BTI Roger Scotton Senior Advisor - International Affairs William Kattan Senior Advisor - Legal Services & Enforcement
BMA House • 43 Victoria Street • Hamilton HM 12 BermudaP.O. Box 2447 • Hamilton HM JX Bermudatel: (441) 295 5278 • fax: (441) 292 7471email: [email protected] • website: www.bma.bm