Consultation Paper: The Insurance Brokers and Insurance Agents Code of Conduct (August 2018)

Summary

This is a Bermuda Monetary Authority consultation paper setting out a proposed Code of Conduct for Insurance Brokers and Insurance Agents registered under the Insurance Act 1978. It invites industry comment on draft duties, standards and procedures that the Authority intends to require of these intermediaries, covering governance, client protection, disclosure, AML/CFT and cooperation with regulators.

• Governance and fitness: Controllers and officers must meet fit and proper criteria, boards must implement a documented corporate governance framework, and firms must maintain adequate staffing, training and physical presence in Bermuda.
• Financial resources and records: Firms must hold adequate professional liability insurance, maintain adequate financial systems, controls, and books and records kept in Bermuda.
• Client relationships and disclosure: Firms must safeguard client monies in separate trust accounts, provide written terms of business, disclose fee structures and changes, and give clients prescribed pre-contract information.
• Complaints, conflicts and fraud: Documented complaint handling procedures, conflict of interest management, and fraud prevention and detection policies are required.
• AML/CFT and sanctions: Client due diligence, ongoing identification of directors, officers and beneficial owners, and compliance with Bermuda's AML/ATF legislation and international sanctions regimes are required.
• Outsourcing and reputation: Firms remain ultimately responsible for outsourced functions and must avoid bringing Bermuda's reputation into disrepute.
• Regulatory cooperation: Firms must notify the Authority of material business changes, compliance failures, staff fraud or dishonesty, indemnity cover changes, and material cyber breaches.

As a consultation paper, the Code is not yet finalised; the Authority sought industry comments by 7 September 2018. The paper states that once published, the Code takes effect immediately with a compliance deadline of 30 June 2019, so affected firms should track the final version for confirmation of these dates.

Key obligations

• Ensure controllers and officers meet fit and proper person criteria and notify the Authority immediately of material concerns about a controller or officer
• Implement a documented corporate governance framework and appoint qualified board members
• Maintain adequate professional liability insurance appropriate to the nature, scale and complexity of the business
• Maintain adequate financial systems, controls, and books and records kept in Bermuda, including client and account records
• Safeguard client monies through adequate controls and separate client trust accounts distinguishable from the firm's own accounts
• Provide clients with a documented, disclosed fee structure and written terms of business, with adequate notice of any changes
• Give clients minimum pre-contract disclosures (insurer identity, coverage, premium, cancellation rights, claims process, etc.)
• Maintain documented complaint handling procedures communicated to policyholders and clients
• Maintain policies and procedures to prevent, detect and remedy fraud and criminal activity
• Carry out client due diligence before acting for any new client and comply with AML/ATF legislation and international sanctions requirements
• Perform due diligence and ongoing monitoring of any outsourced service providers, retaining ultimate responsibility for outsourced functions
• Notify the Authority in writing of anticipated non-compliance, staff fraud or dishonesty, changes to indemnity cover, or material cyber breaches
• Insurance Agents may only place business with Bermuda-registered insurers or as permitted by their Certificate of Registration, and may not place business with another Insurance Agent without prior Authority approval

Applies to

Insurance Brokers, Insurance Agents

Deadlines

• 7 September 2018: Deadline for industry and interested persons to submit comments on the consultation paper to policy@bma.bm
• 30 June 2019: Established deadline for compliance with the Code once it comes into effect, per the consultation paper's implementation section