Insurance Code of Conduct - Revised July 2015

Summary

This is the Bermuda Monetary Authority's Insurance Code of Conduct, issued under section 2BA of the Insurance Act 1978. It sets out duties, standards and sound principles that registered insurers (and reinsurers) must observe in corporate governance, risk management, governance functions, outsourcing, and market conduct toward policyholders. The Authority applies the Code proportionately based on an insurer's nature, scale and complexity, and non-compliance is a factor in assessing whether an insurer is conducting business in a sound and prudent manner.

• Corporate governance: Insurers must establish a sound governance framework; the board bears ultimate responsibility for oversight, strategy, fitness and propriety of directors/officers, and cannot delegate away this responsibility.
• Risk management: Insurers must identify and manage material risks (underwriting, investment/liquidity/concentration, market, credit, operational, group, strategic, reputational, legal) and maintain documented policies and procedures.
• Governance functions: Requirements to maintain risk management, internal controls, internal audit, compliance and actuarial functions, plus periodic self-assessment of governance effectiveness.
• Outsourcing and insurance managers: Where functions (including chief/senior executive roles) are outsourced to an insurance manager, the board must set out duties in a management agreement and ensure oversight and fitness-and-propriety checks continue.
• Market discipline and disclosure: Insurers must deal fairly and with integrity with policyholders, provide clear disclosure, protect policyholder assets, oversee authorised intermediaries, ensure advertisements are not misleading, service policies appropriately, and maintain a documented complaints procedure.

The Code took immediate effect upon publication in July 2015 and applies to all insurers (including reinsurers) registered under section 4 of the Insurance Act 1978, with proportionality applied especially for limited purpose insurers.

Key obligations

• Every insurer must establish and maintain a sound corporate governance framework providing appropriate board oversight and protecting policyholder interests.
• The board must ensure processes exist to assess and document the fitness and propriety of board members, controllers, officers and third-party service providers.
• Where an insurance manager is used, the board must set out the manager's duties, responsibilities and authorities in a management agreement and ensure the manager is fit and proper.
• Insurers must maintain a documented risk management framework covering material risks (underwriting, investment/liquidity/concentration, market, credit, operational, group, strategic, reputational, legal) and associated policies and procedures.
• Insurers must establish and maintain risk management, internal controls, internal audit, compliance and actuarial functions, and conduct periodic self-assessment of governance effectiveness.
• Insurers must adopt and oversee a remuneration policy that does not induce excessive or inappropriate risk-taking.
• Insurers must arrange appropriate protection (e.g. segregation) for policyholder assets they control or are responsible for.
• Insurers must ensure authorised intermediaries carrying on business in Bermuda are registered with the Authority and have written contracts covering products, services, commissions and responsibilities.
• Insurers must ensure advertisements are clear, fair, not misleading, recognisable as advertisements, and include statements of related risks and appropriate caveats on tax benefits and past performance.
• Insurers must service policies through to completion of obligations, disclose contractual changes to policyholders in a timely manner, and handle claims fairly and promptly.
• Insurers must have a documented complaints procedure that is accessible to policyholders and retains records of complaints, responses and actions taken.

Applies to

insurers, reinsurers, insurance managers, authorised intermediaries, Class 1, Class 2, Class 3, Class A, Class B and Special Purpose insurers, limited purpose insurers

Deadlines

• July 2015: The Code comes into immediate effect once published in July 2015.

Related documents

• This document is made under Insurance Act 1978