The Insurance Code of Conduct (February 2010)

Summary

This is the Bermuda Monetary Authority's Insurance Code of Conduct, issued under Section 2BA of the Insurance Act 1978. It sets out the duties, standards and sound principles that registered insurers (including reinsurers) must follow, and compliance with it is a factor the Authority considers when assessing whether an insurer is being conducted in a sound and prudent manner under the Act's minimum criteria. The Authority applies the Code proportionately, based on each insurer's nature, scale and complexity.

• Corporate governance: Requires a sound governance framework, board oversight, fitness and propriety assessments of board members, controllers, officers and service providers, and clear delegation and reporting lines, including for insurance managers and the principal representative.
• Risk management: Requires a documented risk management and internal controls framework covering underwriting, investment/liquidity/concentration, market, credit, operational, group, strategic, reputational and legal/litigation risk, with identification, measurement, monitoring and reporting processes.
• Governance mechanisms: Covers internal controls, internal audit, actuarial function, and compliance arrangements supporting the board and senior executives.
• Outsourcing: Sets expectations for oversight and accountability when functions (including to insurance managers) are outsourced.
• Market discipline and disclosure: Requires clear pre-contract and ongoing written disclosure to policyholders, protection of policyholder assets, oversight of authorised intermediaries, fair advertising standards, and effective complaints handling with record retention.

The Code came into effect on 1 July 2010 and applies on an ongoing basis to insurers registered under the Insurance Act 1978, as well as to related parties such as insurance managers, principal representatives and authorised intermediaries acting on insurers' behalf.

Key obligations

• Every insurer must establish and maintain a sound corporate governance framework with board oversight of governance policies and practices
• The board must ensure processes exist to assess and document the fitness and propriety of board members, controllers and officers
• Every insurer must appoint a principal representative resident in Bermuda and maintain a principal office in Bermuda, approved by the Authority
• Where an insurance manager is used, the board must ensure duties, responsibilities and authorities are set out in a management agreement that obliges full cooperation with the Authority
• The board and senior executives must adopt and maintain a sound risk management and internal controls framework covering all material risk categories identified in the Code
• Insurers must make arrangements enabling the principal representative to access relevant records and perform its statutory duties, including reporting certain events to the Authority
• Insurers must provide policyholders with clear, timely, written disclosure of relevant information, benefits, risks and obligations before and during the contract
• Insurers with control of policyholder assets must arrange proper protection, such as segregation and identification of those assets
• Insurers must ensure their authorised intermediaries carrying on business in Bermuda are registered with the Authority and disclose required information to policyholders
• Insurers must ensure advertisements are not misleading, are clearly identifiable as advertisements, and meet specified content standards
• Insurers must maintain complaints handling procedures and retain records of complaints, responses and actions taken

Applies to

insurers registered under Section 4 of the Insurance Act 1978, reinsurers, insurance managers, principal representatives, authorised intermediaries

Deadlines

• July 1st 2010: Date on which the Insurance Code of Conduct comes into effect

Related documents

• This document is made under Insurance Act 1978