2 year old biting his older sister and starting to get really rough

Hey guys!
I need some advice. I have a 2 year old who in the past month has bitten his older sister 3 times. I am a new day home and am not sure how to talk to the parents about concerns. These 2 kids are pretty good kids. They listen well, eat well, nap well, and play well. They both are quite affectionate towards each other in the sense that they are always hugging and kissing (like when he goes down for his nap). But all 3 times that he has bit her has been when they are hugging each other. He doesn't really talk so I was thinking that maybe it was him getting frustrated with his words (at least that's what I have read) but they aren't even doing anything. One of them goes in for a hug and bam! He bites her without a warning (Once on the nose, on the back, and on the stomache - the one on the back broke skin). All three times I have been in the room and standing right there and there is nothing that I can think of that would have caused it. I'm worried that one day he'll do it to my own son or to another child if this doesn't stop. Also, these last couple of days I have really been trying to get him to stop crawling all over his sister as it is seeming to be getting worse and really starting to hurt her because he's grabbing her around the neck and jumping on her. I caught him today trying to crawl on top of my 15 month old. I have talked to the mom about the biting and today I told her that he his getting quite rough and all she says to him is 'what's going on buddy? Be nice to your sister.' I have been giving him a warning and then timeouts when he won't stop rough housing with her and he goes straight to timeout when he bites her. before and after I say 'no' sternly and tell him we don't bite/hurt people or rough house but he just stares at me blankly with a grin on his face. I honestly don't think he understands what I'm saying at those moments (this is what his mom says that they do at home as well). Afterwards I make him apologize and his mom says that she makes him give his sister a hug.

Do any of you have any suggestions before this gets out of hand? Honestly, I'm thinking about saying no hugging because that is when he has bitten but is that reasonable when it's between siblings? The mom really doesn't seem too concerned but I am and not too sure how to go about this.
Thanks in advance!

I am getting conflicting signals from the mom here - first she says what is going on buddy to the child then admits they have the same issues at home and have to resort to timeouts.

In many of these cases the parents - dad usually - is rough housing with both kids and they don't get that it isn't appropriate outside the home or what the intensity limits are.

Sometimes people just don't want to be bugged and sibling or not they don't always want a hug or squeezed that hard or whatever. Try making sure each has personal space and teach them that at daycare we need to ask the other person if they would like a hug and respect their answer if it is no thank you. While you aren't saying he can't hug at home or whatever it is less appropriate in a group setting. If they were at school the hands off policy would apply sibling or not. Normally I am lax about siblings and let them get away with more but only with each other. However, they have proven that they can not handle the privilege at daycare so it needs to be taken away for now till they learn their limits.