Stakeholder letter: Conduct of Business Regulatory Regime - Revisions to the Insurance Code of Conduct (2021-12-07)

Summary

This is a stakeholder letter from the Bermuda Monetary Authority (BMA) responding to industry feedback received on its Consultation Paper proposing revisions to the Insurance Code of Conduct, particularly new conduct-of-business principles for insurers writing domestic retail business. It clarifies several points raised by stakeholders but does not itself finalise the Code; the final Code and a transition period will follow later, after related legislative amendments are made.

• Retail business definition: SMEs remain outside the legal definition of retail business for now; the existing definition (individual consumers) is unchanged, though the Authority may explore this further in future.
• Territorial scope: The Code applies only to Bermuda-licensed insurers, not to affiliates or group members regulated and operating outside Bermuda; the conduct-of-business changes do not extend the Code's applicability to entities not already subject to it.
• Conflicts of interest: Insurers are expected to have policies and procedures to identify and manage conflicts of interest; where no conflict exists given the nature of a transaction, no further action is required.
• Fair treatment of policyholders: Section 8.2.1 will be amended so that only policies require Board approval, while procedures need approval only from relevant senior management in line with the firm's existing control structure.
• Authorised sales representatives: The term retains its existing meaning and normally includes third-party brokers and intermediaries contracted to sell an insurer's products.
• Product suitability and intermediaries: Both insurers and any third parties they contract (including authorised intermediaries and tied agents) bear responsibilities for suitability of advice; insurers should conduct normal due diligence when appointing third parties and make them aware of applicable Code provisions. A 'comply with all laws' covenant will satisfy the legal-obligation wording in paragraph 84(a).
• Terms of business: Wording on the terms of business obligation (Section 8.3.5) will be modified to reflect that, in most cases, terms are expressly disclosed within the insurance contract itself.

The Authority intends to finalise the Code once amendments to the Bermuda Monetary Authority Act 1969 (to give it a clear conduct-of-business mandate) are made and a further consultation on other Code updates concludes. A transition period will be set and communicated to insurers at that time to allow them to come into compliance.

Key obligations

• Once the final Code is issued, insurers writing domestic retail business will need Board-approved policies and senior-management-approved procedures for fair treatment of policyholders
• Insurers will be expected to maintain policies and procedures to identify and manage conflicts of interest arising in the normal course of business
• Insurers will be expected to conduct normal due diligence when appointing third parties (authorised intermediaries, tied agents) and make them aware of applicable Code provisions
• Insurers will need to disclose terms of business to policyholders, which in most cases will be reflected within the insurance contract itself

Applies to

Bermuda-licensed insurers, insurers writing domestic retail business, authorised intermediaries, tied agents, third-party brokers