The Bermuda Monetary Authority (BMA) plans to add more staff as it moves to allow Class 3A insurers to use internal models to measure risk and determine appropriate levels of capital.The move is another step in the BMA's efforts to put in place a robust regulatory framework that meets international standards.The BMA said it will extend existing provisions to determine capital requirements established in 2009 for Class 4 the largest commercial insurers in the Bermuda market and Class 3B insurers. The BMA said it will now also assess the Class 3A insurers through either a standard capital model or a pre-approved internal capital model.Craig Swan, the BMA's director of risk analytics, said the authority used the same rationale for allowing Class 3As to use internal capital models as it had when permitting Class 4s and 3B firms to have this option.“A standard regulatory capital model, such as the BSCR, is developed and calibrated for the risk characteristics of the ‘average' insurer in the market,” Mr Swan said.“Accordingly, a company may feel that its own internal model, being customised, provides a more appropriate measurement of its specific risks for the purposes of determining its regulatory capital requirement. In the event that a Class 3A has an internal model, it is only fair that it also is afforded the opportunity to make application to use that.”The planned extension to Class 3A insurers is contained in a piece of draft legislation entitled the Insurance (Prudential Standards) (Class 3A Solvency Requirement) Rules 2011 (The 3A Prudential Rules).The 3A Prudential Rules stipulate that, provided certain conditions are met, Class 3A insurers can apply to use internal capital models in the place of the standard BSCR-Small to Medium-Sized Entities (SME) model.Class 3A insurers would also be required to submit copies of their capital and solvency return before a specified filing date.Class 3A insurers are defined as small commercial insurers whose percentage of unrelated business represents 50 percent or more of net premiums written or loss and loss expense provisions, and where the unrelated business net premiums are less than $50 million.BMA CEO Jeremy Cox said: “This extension of pre-approved internal capital models to Class 3A insurers is part of the BMA's strategy to apply a proportionate, risk-based reporting regime appropriately throughout the industry. This extension strategy, as well as the Authority's publishing of these draft pieces of legislation for consultation, is a good example of our commitment to ensuring that Bermuda's regulatory framework remains practical for the entire industry.”Mr Cox added that the BMA will ensure its team has sufficient resources and the necessary skills to apply a rigorous review of internal capital model applications.The BMA says it continues to work towards accepting internal model applications for 2012 and has hired senior actuary, David Theaker, to oversee the process.Mr Theaker has extensive experience from his years at the UK's Financial Services Authority (FSA).He represented the FSA on various Solvency-II related teams at the European Insurance and Occupational Pensions Authority (EIOPA).He was also extensively involved with building and consulting on Individual Capital Adequacy Standards (ICAS).To further enhance resources within the Risk Analytics Department's Actuarial Team, additional actuaries will be joining the BMA over the next few months.A second piece of draft legislation: the Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment Rule 2011 (“the Rule”) seeks to amend filing requirements for registered Class 4 and Class 3B insurers and clarifies certain provisions regarding annual regulatory reporting.The Rule also gives the Authority power to revoke its granted approval for an internal capital model if that model is deemed no longer suitable for the purposes of establishing an enhanced capital requirement. In addition, where the BMA has not been appointed group wide supervisor, the rule makes provision for registeredClass 4 and Class 3B insurers to submit quarterly financial returns to the Authority.The insurance industry and any other interested persons are invited to submit their view on the proposals set out in the rules.Comments should be sent to the Authority addressed to policy[AT]bma.bm no later than August 31, 2011.