Technology and an end to traditional reporting

BMA leads global adoption of new information reporting system

The Bermuda Monetary Authority (BMA) is leading the global adoption of a new insurance information reporting system for regulators and has been recognised internationally in helping to develop a new computer-based insurance reporting system.

The new reporting system uses a computer language known as XBRL (eXtensible Business Reporting Language), and it is anticipated that it will be adopted by financial regulators around the world.

John Dill, director of management services—who is leading the work of the Authority—said that the BMA had recently begun working with an organisation called ‘The Open Compliance and Ethics Group’ (OCEG), whose purpose is to help organisations align their governance, compliance and risk management activities.

“OCEG has done taxonomy work that brings in various risk frameworks, which they map to Solvency II guidelines,” Dill said. “Such taxonomy work creates a framework for categorising and standardising data or information. Therefore, this work essentially creates a Solvency II governance, risk and compliance (GRC) extension taxonomy.”

Dill, who is responsible for IT strategy and development at the BMA, said the Authority was one the first regulators in the world to adopt XBRL for insurance regulatory reporting and the standardised exchange of financial information between the BMA and Bermuda’s re/insurance industry.

Jeremy Cox, chief executive officer of the BMA, added: “The Authority’s XBRL work was acknowledged in a report released in June by the International Financial Reporting Standards (IFRS) Foundation. In the IFRS report, the BMA was placed in the same category as the European Banking Authority in terms of helping to develop this cutting-edge financial reporting system. The Authority is very pleased to have received this level of recognition for our work in this area.”

Dill explained that the international desire to create a computerbased insurance reporting system grew out of the post-financial crisis environment, when regulators began to see a shift from information being exchanged at the document level to the data level.

"This tool will assist in initiatives such as group supervision, where the timely and accurate sharing of information could lead to more effective supervisory relationships with greater co-operation and trust amongst supervisors as a key by-product."

“XBRL assists with this improved information exchange by standardising data, which means the data can be extracted and analysed in a common format,” Dill said. “Since businesses in Bermuda and elsewhere—as well as regulators—are adopting this format, the Authority’s vision is that our XBRL system will enhance efficiencies in our processing of the financial information insurers submit to the Authority. This, in turn, will help to produce richer reports on market trends and internal efficiencies.”

The XBRL technology was selected for Solvency II because of its ability to represent multi-dimensional business information— and financial information in particular—in a standardised manner. But it was also selected due to its increasing levels of adoption by European supervisors.

Additionally, the European Insurance and Occupational Pensions Authority (EIOPA) announced that XBRL has been chosen to be the uniform format for Solvency II reporting across Europe. The Solvency II directive will set out new capital adequacy and risk management standards for European insurers. Bermuda’s XBRL system has been designed to support reporting requirements for Bermuda insurers that are aligned with Solvency II.The components within Bermuda’s system contributed to the decision to use the XBRL format in Europe for Solvency II reporting.

Bermuda is not the only country to adopt XBRL for information reporting—the People’s Republic of China’s Ministry of Finance has also announced that it would be adopting XBRL across several ministries—including the China Insurance Regulatory Commission— for the purposes of financial information reporting.

“Bermuda and China may be among the first countries to adopt XBRL for insurance, but more will follow soon,” Dill predicted.

Dill also explained that with the further development of XBRL this year, the Authority is continuing to build upon the foundation set in place during the initial phase of its IT strategy. “Overall, the Authority intends to use XBRL to enhance the manner in which we collect, analyse, measure and share information for supervisory purposes,” he said.

Cox added that "this tool will assist in initiatives such as group supervision, where the timely and accurate sharing of information could lead to more effective supervisory relationships with greater co-operation and trust amongst supervisors as a key by-product. This project highlights the BMA’s efforts to be a leader in its use of technology and we see this initiative as not only making us more costeffective, but also more proactive and responsive as supervisors.”

Technology at the BMA: an overview

The Bermuda Monetary Authority (BMA) believes that the job of regulating a vibrant, multibillion dollar financial services industry requires a regulator that is every bit as technologically innovative as the market it supervises.

As a result, since 2008, the Authority has adopted a strategy to apply technology to risk measurement. The BMA is also exploring new ways to utilise technologies that will provide support for the increasingly complex requirements of both corporate reporting and regulatory oversight.

In line with technological and regulatory framework changes internationally, the Authority relies heavily upon its ability to leverage technology to achieve operational, regulatory and supervisory innovations. A good example of the Authority’s recognition of the role that technical innovation plays in supporting organisational growth, while minimising expenditure, is the Authority’s recent work on eXtensible Business Reporting Language (XBRL). XBRL is just part of the implementation of the BMA’s strategic information technology roadmap known as Project RAIN.

Project RAIN (Reporting, Analysis and Information-retrieval Network) is a multi-year initiative designed to automate the Authority’s core business processes and remains the cornerstone of its information technology strategy. This initiative, which has been in progress over the last three years, supports the ongoing transformation and increased process and cost-efficiencies of the Authority’s regulatory framework. Project RAIN places a heavy reliance upon the use of XBRL, and last year the Authority introduced XBRL-enabled Bermuda capital and solvency return (BSCR) forms for Class 4 and 3B insurance companies.

The Authority also made progress on developing innovative software applications and information technology solutions that will enhance productivity; improve communication and collaboration among working groups; aid business intelligence and regulatory analytics; and streamline processes. Other process improvements aided by information technology systems delivery in 2010 included enhancements to the Authority’s electronic Corporate Authorisations System or e-filing.

John Dill is director of management services at the Bermuda Monetary Authority. He can be contacted at: jdill@bma.bm