The Bermuda Monetary Authority (BMA) framework is a supervisory regime for commercial insurers and insurance groups which has full equivalence with the EU’s Solvency II regime. It has enhanced statutory and prudential reporting requirements for Bermudan entities, promoting transparency. Companies must calculate their capital according to their individual risk profile and produce a forward-looking Solvency Self-Assessment (GSSA/CISSA). This brings increased demand for modelling expertise and sound risk management.
BMA published a Guidance Note outlining their expectations for climate risk management in August 2022. (Re)insurers are expected to address climate change risk in their governance, risk management framework and GSSA/CISSA. Progress on the implementation of the guidance will be monitored during 2023, with full adaptation by 2025. See further information on the new requirements for climate change risk here.
Finalyse offers a comprehensive set of managed services and tailored solutions. Finalyse can assist you in complying with these new regulations, including meeting the recently published climate risk management requirements for 2023.
HoAF Support:
Calculation of technical provisions for EBS, assessing appropriateness of the methods, models and assumptions, sufficiency & quality of data. And providing an opinion on the CISSA
Capital Modelling support:
Production of the BMA Capital Requirement supporting analysis and maintaining capital model is maintained in line with the internal governance framework
CISSA/GSSA support:
Capital planning and optimisation, GSSA projections and stresses, including climate risk scenarios (see also here). Communicating complex concepts and enabling management decision-making through sound analytical rationale
Strategic and operational:
Providing actuarial support on strategic initiatives, streamlining the actuarial process and enhancing to the Actuarial Function including policies, processes and tools
SAA support:
Specifying asset classes, defining objectives and constraints, forming capital market expectations, establishing asset class bandwidths, validating the optimal allocation and optimizing the asset mix
Peer reviews:
Review of assumptions, methodologies, material uncertainties and potential deteriorations, expert judgement, appropriateness of models and reasonableness of the AA’s conclusions
On 27 January 2022, the European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the methodological principles of developing bottom-up stress tests for climate change risks focusing on the design and calibration of stress tests for climate change risks as part of the future supervisory testing framework. This article examines EIOPA's methodological considerations outlined in this paper.
ReadClimate change poses a serious risk for society and for (re)insurers, with the harmful impact of global warming already being visible. Without further international climate action, global average temperatures and the associated physical risks will continue rising, resulting in increased underwriting risk of insurers, impacting asset values, and challenging their business strategies. On the 5th October 2020, the EIOPA has published a consultation paper on the use of climate change risk scenarios in the ORSA in the form of a draft supervisory Opinion. The consultation is a follow-up to the Opinion on Sustainability within Solvency II released in September 2019 which recommended that (re)insurers should consider climate risks beyond the one-year time horizon within their system of governance, risk-management system and ORSA.
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