Consultation Paper: Insurance Amendment Act 2016 (Insurance Managers and Other Matters) (2016-04)

Summary

This is a Bermuda Monetary Authority consultation paper seeking industry feedback on proposed amendments to the Insurance Act 1978, primarily to strengthen oversight of insurance managers, plus a set of unrelated housekeeping amendments to insurance legislation. It sets out draft rules and an appended draft Insurance Manager's Return form, and invites comments before the proposals are finalised into a Bill.

Insurance manager reforms

• New Insurance Manager's Return: Insurance managers would be required to file a detailed prudential return (governance, staffing, services provided, outsourcing, client asset segregation, financial resources, PI insurance) within six months of financial year end, extendable to nine months with BMA approval.
• Professional indemnity insurance: Minimum criteria for registration would be enhanced to require insurance managers to hold sufficient professional indemnity cover.
• Insurance Manager Code of Conduct (IM Code): A new code covering governance, risk management, outsourcing, AML/ATF, client due diligence, confidentiality and cooperation with regulators would apply immediately, with insurance managers given until 31 December 2016 to implement it.
• Notification of controller/officer changes: A new Section 30CA would require written notice to the Authority within 14 days of any change to shareholder controllers or officers, replacing the current annual list requirement.
• Investigation powers: The Authority's investigative powers under Section 30 would be extended to cover the affairs of insurance managers where it is in clients' interests.
• AML/ATF scope expansion: The Authority proposes recommending that all insurance managers registered under the Act (not just Long-Term business managers/brokers) be brought within Bermuda's AML/ATF regulated financial institution regime.

Other proposed amendments

• Declarations of compliance: Section 15A declarations would be expanded to cover the minimum liquidity ratio, with sample forms attached as appendices.
• Civil penalties: Section 18A would be amended to allow civil penalties on insurance managers for breaches of Section 17 duties or prudential standard rules; similar late-payment penalty provisions would extend to insurance groups.
• Fee basis clarification: Class 3B and Class 4 insurer annual fees would be based on actual (not expected) gross premiums written in the preceding year, with related amendments to the Bermuda Monetary Authority Act 1969.
• GAAP and audit provisions: References to additional GAAP financial statements would be removed and related auditor reportable-event requirements repealed.

As a consultation paper, none of these changes are yet in force; the Authority invited industry comment by 27 May 2016 before finalising the Bill and prudential rules.

Key obligations

• Under the proposed rules, insurance managers would need to file the Insurance Manager's Return (covering governance, staffing, services, outsourcing, client asset segregation and financial resources) within six months after financial year end, or within nine months if the Authority grants an extension.
• Insurance managers would need to maintain professional indemnity insurance sufficient to meet their business obligations as part of the minimum criteria for registration.
• Insurance managers would need to comply with the new Insurance Manager Code of Conduct by 31 December 2016.
• Insurance managers would need to give the Authority written notice within 14 days of becoming aware of any change to their shareholder controllers or officers.
• Insurance managers would need to keep copies of filed returns at their principal place of business for five years and produce a copy to the Authority on request by a specified date.
• All insurance managers registered under the Act would become subject to Bermuda's AML/ATF regime as regulated financial institutions under the proposed amendment to Regulation 2(2)(d).
• Directors of insurers would need to file expanded declarations of compliance addressing the minimum liquidity ratio.

Applies to

insurance managers, commercial insurers (Class C, Class D, Class E, Class 3A, Class 3B, Class 4), designated insurers, insurance groups, company service providers (CSPs)

Deadlines

• 27th May 2016: Deadline for industry and other interested persons to submit comments on the consultation paper and draft Bill to policy@bma.bm
• 31st December 2016: Deadline for insurance managers to implement the proposed Insurance Manager Code of Conduct, which would take immediate effect
• six months after the end of the financial year (extendable to nine months with Authority approval): Proposed filing date for the Insurance Manager's Return
• 14 days upon knowledge of change: Proposed deadline for insurance managers to notify the Authority in writing of changes to shareholder controllers or officers
• five years from the filing date: Proposed period for which insurance managers must retain copies of filed returns

Related documents

• This document amends Bermuda Monetary Authority Act 1969
• This document amends Insurance Act 1978