Monkton
Insurance Services Limited
Captive insurance companies licensed in Bermuda are regulated in accordance with the Bermuda Insurance Act, 1978 and are required to file statutory financial returns and maintain solvency margins in compliance with the Insurance Returns and Solvency Regulations, 1980. The following is a compilation of the Bermuda Insurance Returns and Solvency Regulations, 1980 and all subsequent amending legislation and represents a current statement as at December 31, 1997 of the Bermuda Insurance Returns and Solvency Regulations as amended. While every effort has been made to ensure the accuracy of the compilation, no responsibility can be undertaken for any errors which may have inadvertently occurred. Persons seeking advice on the Regulations themselves are recommended to consult their professional advisors.
INSURANCE RETURNS AND SOLVENCY REGULATIONS 1980
Schedule 1 - General business solvency margin
Schedule 2 - Calculation of statutory ratios
Citation - 1. These Regulations may be cited as the Insurance Returns and Solvency Regulations 1980.
Interpretation - 2. In these Regulations
"accounts" means financial statements;
"the Act" means the Insurance Act 1978;
"affiliate" has the same meaning as in the Insurance Accounts Regulations 1980;
"composite" and "section 24(6) composite" have the same meanings as in the Insurance Accounts Regulations 1980;
"financial return" or "return" means statutory financial return;
"loss reserve specialist" has the same meaning as in the Insurance Accounts Regulations 1980;
"relevant year" has the meaning assigned thereto in regulation 4(2);
"statutory financial statement", "statutory balance sheet", "statutory statement of income", "statutory statement of capital and surplus" and "statutory open year business revenue statement" have the same meanings as in the Insurance Accounts Regulations 1980;
"regulations" means regulations made under the Act;
"unrelated business", in relation to an insurer, means insurance business consisting of insuring risks of persons who are not shareholders in, or affiliates of, the insurer; and "related business", in relation to an insurer, means insurance business which is not unrelated business.
Insurers to make statutory financial return in accordance with these Regulations - 3. Except as otherwise allowed by a direction made under section 56 of the Act affecting any insurer, the form of statutory financial return that every insurer is to send to the Registrar pursuant to section 18(1) of the Act is the form that is prescribed in these Regulations; and, except as aforesaid, it shall be the duty of every insurer to send to the Registrar pursuant to section 18(1) of the Act a return in that form.
Return to relate to relevant year - 4. (1) Every return shall relate to the relevant year.
(2) In these Regulations "relevant year", in relation to a return, means the financial year to which the statutory financial statements relate which are required to be available or filed by section 17 of the Act.
Content of statutory financial
return - 5. (1) The statutory financial return shall consist of the following
documents
(a) in every case
(i) a cover sheet
(ii) an auditor's report in pursuance of section
16 of the Act, and
(iii) a declaration of the statutory ratios;
(b) where the insurer carried on general business in the relevant year, a solvency
certificate within the meaning of section 33(5) of the Act
(in these Regulations called a "general business solvency certificate")
in addition;
(bb) an opinion of a loss reserve specialist where such is required
under
(i) section 18B of the Act, or
(ii) the instructions
in Part 2 of Schedule 3 to the Insurance Accounts Regulations
1980, relating to line 17 of the statutory balance sheet, in which case it shall
be accompanied by statutory financial statements and the notes to those statements,
in addition;
(c) where the insurer carried on long-term business in the
relevant year
(i) a long-term business solvency certificate; and
(ii) an actuary's certificate
in pursuance of section 27 of the Act,
in addition; and
(d) in the case of a Class 4 insurer, a schedule of ceded
reinsurance, in addition.
(2) Regulations 6, 7, 8, 8A, 9, 13, 14 and 14A shall have effect as to the form and content of the cover sheet, the auditor's report, the general business solvency certificate, the loss reserve certificate, the long-term business solvency certificate, the declaration of the statutory ratios, the actuary's certificate and the schedule of ceded reinsurance respectively.
Cover sheet - 6. The cover sheet shall
(a) bear
the name of the insurer and the title "Statutory Financial Return";
(b)
state the period covered by the return;
(c) state the nature of the insurance
business carried on by the insurer, that is to say, it shall state
(i) whether the insurance business carried on is general business or long-term
business or both;
(ii) whether, where the insurer is a composite, it is a section
24(6) composite or not;
(iii) where general business is carried on
(aa) the
classes of related and unrelated business; and
(bb) the amounts of gross premiums
written in respect of each such class;
(iv) whether or not annual aggregate stop
loss reinsurance is in effect and, if such reinsurance is in effect, the maximum
annual aggregate net losses retained in respect of each such class of business;
(v)
any other information required to describe the nature of the insurer's business;
(d) state the currency in which amounts are shown in the insurer's statutory financial
statements and whether that currency is the currency in which those amounts are required
by regulation 10(2) of the Insurance Accounts Regulations
1980 to be shown;
(e) state whether a statutory open year business revenue
statement was annexed to the insurer's statutory statement of income and, if so,
to what class or classes of the insurer's general business that first-mentioned statement
relates.
Auditor's report - 7. (1) The auditor's report
shall be signed by the insurer's approved auditor and addressed to the Registrar,
and shall state
(a) that the auditor has carried out a proper examination
of the insurer's statutory financial statements, and that that examination was conducted,
and the auditor's report has been prepared, in accordance with accepted auditing
standards;
(b) whether in his opinion the statutory financial statements have
been prepared in accordance with the requirements of the Act and of any applicable
regulations;
(c) whether in his opinion
(i) the solvency certificate complies, or. where the case requires, the solvency
certificates comply, with the requirements of these Regulations; and
(ii) it was
reasonable for the persons signing such a certificate to have arrived at the opinions
expressed in the certificate;
(d) whether in his opinion the declaration of the statutory ratios complies with the requirements of these Regulations.
(2) Where any event specified in paragraph (3) occurs in relation to an audit, the auditor shall qualify his report accordingly and include in his report such observations, whether of factor opinion, as he considers necessary for bringing the nature and effect of the qualifications to the attention of the Registrar.
(3) The events referred to in paragraph (2) are
(a) there were deficiencies
in the audit consisting of
(i) inability of the auditor to obtain essential information; or
(ii) restrictions
on the scope of the audit; or
(iii) some other deficiency or deficiencies;
(b) the auditor disagreed with any valuation made in the statutory financial statements;
(c)
in some respect or respects the statutory financial statements or the certificates
of solvency or the declaration of the statutory ratios do not in his opinion comply
with the requirements of the Act or any applicable regulations;
(d) the auditor
considered an opinion or opinions expressed in a solvency certificate unreasonable;
and
(e) the auditor considered that there was a significant doubt as to the
insurer's ability to continue as a going concern.
General business solvency certificate
- 8. (1) A general business solvency certificate shall relate to the general business
of the insurer and shall be signed
(a) by at least two directors of the insurer
(of whom one must be a director resident in Bermuda if the insurer has a director
so resident); and
(b) by the insurer's principal representative in Bermuda.
(2) The said certificate shall state
(a) whether or not the said insurer
has prepared statutory financial statements in respect of the relevant year;
(b)
whether or not the said statements are available at the insurer's principal office
in Bermuda pursuant to section 17(1) or, as the case may be,
have been filed pursuant to section 17(3) of the Act;
(bb)
whether or not the insurer has complied with every condition of its certificate of
registration;
(c) the aggregate value of the insurer's assets as shown in the
statutory balance sheet for the relevant year, in this sub-paragraph called "the
statutory balance sheet assets value", and whether or not in the opinion of
those signing the certificate
(i) the statutory balance sheet assets value was determined in accordance with
the requirements of the Act and of any applicable regulations;
(ii) the value
of the insurer's assets at the end of the relevant year was in the aggregate at least
equal to the statutory balance sheet assets value;
(d) whether or not in the opinion of those signing the certificate the aggregate
amount of the insurer's liabilities at the end of the relevant year (after taking
into account all prospective and contingent liabilities, but not liabilities in respect
of share capital) is not more than the aggregate amount of the liabilities as shown
in the insurer's statutory balance sheet for that year;
(e) the following amounts
as shown in the insurer's statutory statement of income for the relevant year
(i) the aggregate amount of the gross premiums written;
(ii) the aggregate
amount of the reinsurance premiums ceded;
(iii) the aggregate amount of the net
premiums written, including the aggregate amount of net premiums shown in the statutory
open year business revenue statement (if such a statement was annexed to the statutory
statement of income);
(f) in the case of an insurer which annexed a statutory open year business revenue statement to its statutory statement of income
(i) whether or not, in the opinion of those signing the certificate, the fund
carried forward in that statement in relation to business transacted in the relevant
year is sufficient to meet all the liabilities outstanding at the end of that year
in relation to that business (including liabilities in respects of risks to be borne
by the insurer after the end of that year in relation to that business);
(ii)
whether or not, in their opinion, the total of the funds carried forward in that
statement in relation to business transacted in the financial year immediately preceding
the relevant year is sufficient to meet all the liabilities outstanding at the end
of the relevant year in relation to that business;
(iii) if funds are carried
forward in that statement in relation to business transacted before the beginning
of the financial year immediately preceding the relevant year, whether or not, in
their opinion, the total of those funds is sufficient to meet all liabilities outstanding
at the end of the relevant year in relation to that business; and
(iv) if funds
are not carried forward in that statement in relation to the business referred to
in division (iii) of this sub-paragraph, whether or not, in their opinion, the liabilities
referred to in that division have been adequately reinsured, and the aggregate amount
of premiums required to secure such reinsurance;
(g) whether any accounts of the insurer for the relevant year have been audited
for any purpose other than the purposes of these Regulations;
(h) whether or not
the minimum liquidity ratio applicable to the insurer for the relevant year was met;
(i)
the amount prescribed by regulation
10 as the general business solvency margin, and whether it was met;
(j) the
aggregate amount of the statutory capital and surplus as shown in the insurer's statutory
statement of capital and surplus for the relevant year;
(k) the currency in which
amounts in the insurer's statutory financial statements for the relevant year have
been shown;
(l) the rate of exchange used, in compliance with paragraphs (2) and
(3) of regulation 16,
for the purposes of any statement called for by this regulation;
(m) if any question
in sub-paragraph (bb), (h) or (i) of this paragraph has been answered in the negative,
whether or not the insurer has taken corrective action in any case and, where the
insurer has taken such action, describe the action in a statement attached to the
certificate.
Loss reserve opinion - 8A. (1) A loss reserve opinion shall relate to the general business of the insurer and shall be signed and dated by a loss reserve specialist.
(2) In such an opinion the loss reserve specialist shall state the extent the instructions in Part 2 of Schedule 3 to the Insurance Accounts Regulations 1980 relating to line 17 of the statutory balance sheet, in so far as those instructions call for the opinion of a loss reserve specialist, have been complied with.
Long-term business solvency
certificate - 9. (1) A long-term business solvency certificate shall relate to
the long-term business of an insurer and shall be signed
(a) by at least two
directors of the insurer (of whom one must be a director resident in Bermuda if the
insurer has a director so resident); and
(b) by the insurer's principal representative
in Bermuda.
(2) The said certificate shall state
(a) whether or not the said insurer
has prepared statutory financial statements in respect of the relevant year;
(b)
whether or not the said statements are available at the insurer's principal office
in Bermuda pursuant to section 17(1);
(bb) whether or not
the insurer has complied with every condition of its certificate of registration;
(c)
the aggregate value of the insurer's assets as shown in the statutory balance sheet
for the relevant year, in this sub-paragraph called "the statutory balance sheet
assets value", and whether or not in the opinion of those signing the certificate
(i) the statutory balance sheet assets value was determined in accordance with
the requirements of the Act and of any applicable regulations;
(ii) the value
of the insurer's assets at the end of the relevant year was in the aggregate at least
equal to the statutory balance sheet assets value;
(d) whether or not in the opinion of those signing the certificate the aggregate
amount of the insurer's liabilities at the end of the relevant year (after taking
into account all prospective and contingent liabilities, but not liabilities in respect
of share capital) is not more than the aggregate amount of the liabilities as shown
in the insurer's statutory balance sheet for that year;
(e) the minimum long-term
business solvency margin prescribed by regulation
12(1)(b), and whether that margin was met;
(f) whether any accounts of the
insurer for the relevant year have been audited for any purpose other than the purposes
of these regulations;
(g) the aggregate amount of the statutory capital and surplus
as shown in the insurer's statutory statement of capital and surplus for the relevant
year;
(h) the currency in which amounts in the insurer's statutory financial statements
for the relevant year have been shown;
(hh) the rate of exchange used, in compliance
with paragraphs (2) and (3) of regulation 16, for the purposes of any statement called
for by this regulation;
(i) the aggregate amount of the premiums and other considerations
shown in line 19(d) of the insurer's statutory statement of income for the relevant
year;
(j) if any question in sub-paragraph (bb) or (e) of this paragraph has been
answered in the negative, whether or not the insurer has taken corrective action
in any case and, where the insurer has taken such action, describe the action in
a statement attached to the certificate.
Minimum margin of solvency for general business - 10. (1) for the purposes of section 6(1) of the Act the prescribed amount by which the value of the general business assets of an insurer must exceed its general business liabilities is the greatest of figure A, figure B and figure C, where those letters represent values calculated, in relation to that insurer, in accordance with Schedule 1.
(3) In this regulation
"general business assets" and "general
business liabilities" respectively mean assets and liabilities established in
conformity with the requirements of the Insurance Accounts
Regulations 1980 for the statutory balance sheet of an insurer carrying on general
business;
"insurer" includes, in relation to section
6 of the Act, a body applying for registration as an insurer under the Act.
Minimum liquidity ratio for general business - 11. (1) The minimum proportion that the liquid assets of an insurer carrying on general business may bear to such an insurer's liabilities (in the Regulations called "the minimum liquidity ratio" ) shall be that set forth in this regulation.
(2) The value of the relevant assets of an insurer carrying on general business shall be not less than seventy-five per centum of the amount of its relevant liabilities, unless the insurer is a section 24(6) composite.
(3) The value of the relevant assets of a section 24(6) composite shall be not less than one hundred per centum of the amount of its relevant liabilities.
(4) In this regulation
"relevant assets" means the assets required
by the Insurance Accounts Regulations 1980 to be shown
on lines 1, 2, 3(a), 5(a), 9, 10, 11 and 12
(a) where the insurer is not a
section 24(6) composite, of the insurer's statutory balance sheet for general business;
(b)
where the insurer is a section 24(6) composite, of the insurer's statutory balance
sheet,
including any other assets which the Minister, on application in any
particular case made to him with reasons, accepts for the purposes of this definition
in that case;
"relevant liabilities" means, in relation to an insurer,
the aggregate of the insurer's liabilities required by the Insurance
Accounts Regulations 1980 to be shown on lines 19 and 38 of the statutory balance
sheet less the aggregate of the insurer's liabilities required by those Regulations
to be shown on lines 31(b), 36 and 37 thereof.
Minimum margin of
solvency for long-term business - 12. (1) The amount of $250,000 is hereby prescribed
(a)
for the purposes of section 6(1) of the Act (except where
at the time of the application for registration the insurer has not yet completed
its first financial year), as the prescribed amount; and
(b) for the purposes
of the statement called for by regulation
9(2)(e), as the margin (in that sub-paragraph referred to as the minimum long-term
business solvency margin),
by which the value of the long-term business assets
of an insurer carrying on long-term business must exceed the amount of its long-term
business liabilities.
(2) In the regulation
"long-term business assets" and :long-term
business liabilities" respectively mean assets and liabilities established in
conformity with the requirements of the Insurance Accounts
Regulations 1980 for the statutory balance sheet of an insurer carrying on long-term
business;
"insurer" includes, in relation to section
6 of the Act, a body applying for registration as an insurer under the Act.
Declaration of statutory ratios
- 13. (1) The declaration of the statutory ratios shall set forth the following ratios
(in these Regulations called "the statutory ratios")
(a) the premiums
to statutory capital and surplus ratio;
(b) the five year operating ratio;
(c)
the change in statutory capital and surplus ratio.
(2) The said declaration shall be dated and shall be signed
(a) by at least
two directors of the insurer (of whom one must be a director resident in Bermuda
if the insurer has a director so resident); and
(b) by the insurer's principal
representative in Bermuda.
(3) The said declaration shall
(a) bear the name of the insurer and the
title "Declaration of Statutory Ratios";
(b) specify the amount of each
such ratio calculated in accordance with the rules set forth in Schedule
2.
Actuary's certificate - 14. (1) The actuary's certificate shall state whether or not, in the opinion of the insurer's approved actuary, the aggregate amount of the liabilities in relation to long-term business as at the end of the relevant year exceeded the aggregate amount of those liabilities as shown in the statutory balance sheet.
(2) The said certificate shall be signed by the insurer's approved actuary and shall be dated.
Schedule of ceded reinsurance - 14A.
The schedule of ceded reinsurance shall be divided into separate entries dealing
with each reinsurer and each entry shall include the following information relating
to each reinsurer
(a) the name of the reinsurer;
(b) the rating of the
reinsurer (if any) and the name of the rating agency;
(c) the jurisdiction of
its incorporation;
(d) the amount of the reinsurance premiums ceded to it during
the relevant year;
(e) the amount of reinsurance recoverable from it (lines 11,
12, 17 and 18 of the statutory balance sheet);
(f) the amount of reinsurance balances
payable to it (lines 28, 29, 33 and 34 of the statutory balance sheet);
(g) the
amount of net reinsurance recoverable from it (that is, the figure required by paragraph
(e) less that required by paragraph (f));
(h) the amount of net reinsurance recoverable
from it which has been due for less than 180 days; and
(i) the remainder of net
reinsurance recoverable from it (that is, the figure required by paragraph (g) less
that required by paragraph (h)).
Requirements relating to preparation of returns generally - 16. (1) Each statutory financial return and any document annexed to such a return shall be prepared in the English language.
(2) All amounts which are shown in any such return or document as aforesaid shall be shown in the currency in which pursuant to regulation 10(2) of the Insurance Accounts Regulations 1980 amounts in any account of an insurer are to be shown; but the Bermudian equivalent of every such amount must be stated next to that amount in every case where that amount is an amount expressed in a foreign currency (in this regulation called a "foreign currency amount");
(3) For the purposes of paragraph (2), the Bermudian equivalent of a foreign currency amount shall be the Bermudian dollar equivalent of that foreign currency amount as converted into Bermudian dollars at the rate of exchange used by any licensed bank in Bermuda in relation to purchases by that bank of that foreign currency on the last day of the relevant year; and the person preparing the return or document in question shall state that rate either in the return or document itself or in some other document made available to the Minister.
Offences - 17 (2) Any person who, in or in relation to a return or a document annexed to a return, makes, or joins in making, any statement which he knows to be false or does not believe to be true commits an offence against these Regulations; and in this paragraph "make a statement", in relation to any statement made, includes a wilful omission to state something that is material.
(3) If, for the purposes of any provision of these Regulations (being a provision
requiring or allowing for a statement to be made either
(a) any insurer;
or
(b) any director or officer or employee of an insurer; or
(c) any approved
auditor,
makes a statement which owing to its or his gross negligence in making
the statement is wrong, or grossly misleading, in a material respect, it or he commits
an offence against these Regulations.
GENERAL BUSINESS SOLVENCY MARGIN
Figure A. 1. For the purposes of regulation
10, figure A has the following value in relation to the class of insurer indicated
Class
1 $120,000
Class 2 $250,000
Class 3 $1,000,000
Class 4 $100,000,000
Figure B. 2. (1) For the purposes of regulation 10, sub-paragraphs (2) and (3) set out the method of calculating figure B in relation to Class 1, Class 2 and Class 3 insurers, and sub-paragraph (4) in relation to Class 4 insurers.
(2) Where the net premiums
(a) written by a Class 1, Class 2 or Class 3
insurer in its current financial year, or
(b) projected to be written by an insurer,
on application for registration as a Class 1, Class 2 and Class 3 insurer, in its
first financial year,
do not or (as the case may be) are not projected to
exceed $6,000,000 figure B shall be calculated as 20% of those net premiums.
(3) Where the net premiums
(a) written by a Class 1, Class 2 or Class
3 insurer in its current financial year; or
(b) projected to be written by an
insurer, on application for registration as a Class 1, Class 2 or Class 3 insurer,
in its first financial year,
do or (as the case may be) are projected to exceed
$6,000,000 figure B shall be calculated as $1,200,000 plus the following percentage
of the net premiums written which exceed $6,000,000 in relation to the class of insurer
indicated
Class 1 10%
Class 2 10%
Class 3 15%
(4) Figure B shall be calculated as 50% of the net premiums written by a Class 4 insurer in its current financial year or projected to be written by the insurer on application for registration as a Class 4 insurer.
(5) In this paragraph, "net premiums written" in relation to any financial
year means
(a) in relation to a Class 1, Class 2 or Class 3 insurer, the net
amount, after deductions of any premiums ceded by the insurer for reinsurance, of
the premiums written by the insurer in that year in respect of general business;
and
(b) in relation to a Class 4 insurer, the net amount, after deductions
of any premiums ceded by the insurer for reinsurance (not exceeding 25% of gross
premiums written), of the premiums written by the insurer in that year in respect
of general business.
and "net premiums projected to be written"
has a corresponding meaning.
Figure C. 3. For the purposes of regulation
10, figure C shall be calculated as the following percentage of the aggregate
(a)
of the amounts shown by the insurer in completing lines 17 and 18 of Form 1 in the
Insurance Accounts Regulations 1980, or
(b) of those
amounts as projected by the insurer on application for registration,
in relation
to the class of insurer indicated
Class 1 10%
Class 2 10%
Class 3 15%
Class
4 15%
CALCULATION OF THE STATUTORY RATIOS
A. The premiums to statutory capital and surplus ratio
1. The above ratio shall describe the proportion that net premiums written by the insurer during the relevant year bear to the insurer's statutory capital and surplus as at the end of that year.
2. For the purposes of the said ratio
"net premiums written"
means the amount shown in line 3 of the insurer's statutory statement of income,
including the aggregate amount of net premiums shown in the insurer's statutory open
year business revenue statement if the insurer annexed such a statement to its statutory
statement of income;
"statutory capital and surplus" means the amount
shown on line 3 of the insurer's statutory statement of capital and surplus less,
in the case of a composite
(a) the amount of $250,000; or
(b) the amount in
fact maintained by the insurer as its margin of solvency for long-term business,
whichever of those amounts is greater,
in each case as respects the relevant
year.
3. The said ratio shall be the relation of the net premiums written to the capital and surplus expressed mathematically as a ratio, with capital and surplus reduced to 1.
B. The five-year operating ratio
1. The above ratio shall describe the proportion that the insurer's losses and expenses as a percentage of premiums expressed cumulatively for the period of five consecutive years including the relevant year bear to the insurer's investment income also so expressed.
2. (1) For the purposes of the said ratio
"expenses" means the
aggregate of the amounts shown on lines 9, 10, 11 and 12, less the amount shown on
line 6, of the insurer's statutory statement of income;
"net general
business investment income" means the amount shown on line 17 of the statutory
statement of income;
"net losses incurred and net loss expenses incurred"
or "losses" means the amount shown on line 8 of the statutory statement
of income;
"net premiums earned" means the amount shown on line
5 of the statutory statement of income;
"net premiums written" means
the amount shown on line 3 of the statutory statement of income;
(2) The reference
in subparagraph 1 of this paragraph to a period of five years is, subject to division
(3) of this subparagraph, a reference to the relevant period of five years during
which the insurer was registered under the Act;
(3)Where at any relevant time
an insurer was so registered for a number of years less than five, this paragraph
applies to that number of years instead of five, and shall be construed mutatis mutandis
accordingly.
3. The said ratio shall be the sum of the los ratio and the expense ratio less
the investment income ratio. For the purposes of the above sum
(a) the loss
ratio is the relation of
(i) net losses incurred and net loss expenses incurred; to
(ii) net premiums
earned, expressed mathematically as a ratio, with net premiums earned reduced to
1;
(b) the expense ratio is the relation of
(i) expenses; to
(ii) net premiums written,
expressed mathematically as a ratio, with net premiums reduced to 1;
(c)
the investment income ratio is the relation of
(i) net general business investment income; to
(ii) net premiums earned,
expressed mathematically as a ratio, with net premiums earned reduced to 1.
4. The five year operating ratio shall also be expressed as a percentage.
C. The change in statutory capital and surplus ratio
1. The above ratio shall describe the proportion that the insurer's statutory capital and surplus as at the end of the immediately preceding financial year ("statutory capital and surplus 1") bears to the difference between statutory capital and surplus 1 and the insurer's statutory capital and surplus as at the end of the relevant year ("statutory capital and surplus 2").
2. For the purposes of the said ratio
"statutory capital and surplus
1" means the amount shown, on line 3 of the insurer's statutory statement of
capital and surplus for the relevant year, as the insurer's total statutory capital
and surplus for the financial year immediately preceding the relevant year;
"statutory
capital and surplus 2" means the amount shown on line 3 of the insurer's statutory
statement of capital and surplus for the relevant year.
3. The said ratio shall be the relation of
(a) the difference between statutory
capital and surplus 2 and statutory capital and surplus 1; to
(b) statutory capital
and surplus 1, expressed mathematically as a ratio, with statutory capital and surplus
1 reduced to 1.
4. The above ratio shall also be expressed as a percentage.