Consultation Paper - Revisions to the Insurance Code of Conduct (Appendix I) (2021-09)

Summary

This is a Bermuda Monetary Authority consultation paper proposing revisions to Section 8 (Conduct of Business) of the Insurance Code of Conduct, following on from a 2020 consultation on a wider conduct of business regulatory regime. Appendix I to the paper contains a red-lined draft of the revised Code, including a version dated December 2021 with a stated effective date. The paper is open for stakeholder comment and does not itself impose binding requirements while in draft.

• Scope split: Proposes renaming Section 8 'Conduct of Business' and distinguishing requirements applicable to all insurers (integrity, conflicts of interest under new 8.1) from those applicable only to insurers writing retail business (8.2 to 8.6), using the Insurance Act 1978 s30JA(2) definition of retail business.
• New integrity duty: New subsection 8.1 would require all insurers registered under the Insurance Act 1978, writing retail or non-retail business, to conduct business with integrity and manage conflicts of interest fairly and transparently.
• Vulnerable persons: Proposes requirements for insurers to have policies and procedures addressing the needs of vulnerable persons/policyholders.
• Suitability documentation: Insurers would be expected to retain sufficient documentation demonstrating that product recommendations were suitable for the policyholder's circumstances at the time.
• Communications: Proposes general principles requiring all communications with policyholders (not just advertisements) to be fair, clear and not misleading.
• IAIS alignment: Introduces new provisions on claims handling (8.2.9), policy servicing (8.3.6) and claims disputes (8.5.2) to align with IAIS Insurance Core Principle 19.
• Board oversight: Section 4.2 of the Code would be amended to require board oversight of insurers' policies and procedures for meeting conduct of business obligations.

The Authority invited comments on the proposals, and the attached draft revised Code text indicates an intended effective date of 1 January 2022 for the Code once finalised. As this is a consultation document, it reflects proposed rather than final requirements at the time of publication.

Key obligations

• Stakeholders wishing to comment must submit responses to conduct@bma.bm no later than 25 October 2021
• Under the proposed revised Code, all insurers registered under the Insurance Act 1978 would be required to conduct business with integrity and manage conflicts of interest fairly and transparently (proposed new section 8.1)
• Insurers writing retail business would be required to retain documentation showing product recommendations were suitable for the policyholder's circumstances (proposed section 8.2.5)
• Insurers would be required to ensure all communications with policyholders are fair, clear and not misleading, not just advertisements (proposed section 8.3.1)
• Insurers would be required to establish claims handling, policy servicing, and claims dispute resolution procedures aligned with IAIS ICP 19 (proposed sections 8.2.9, 8.3.6, 8.5.2)
• The board of directors would be required to oversee insurers' policies and procedures for meeting conduct of business obligations (proposed amendment to section 4.2)

Applies to

insurers, reinsurers, insurers writing retail business, insurance managers, authorised intermediaries

Deadlines

• 25 October 2021: Deadline for stakeholders to submit comments on the consultation paper to conduct@bma.bm
• 1 January 2022: Stated effective date in the attached draft revised Insurance Code of Conduct (Section 8 Implementation clause), though this is part of the appended draft text within the consultation