Explanatory Memorandum - Insurance Amendment (Enhancement of Enforcement Powers) Act 2011 and A Bill entitled Insurance Amendment Act 2011

Summary

This is an explanatory memorandum accompanying a draft bill, the Insurance Amendment (Enhancement of Enforcement Powers) Act 2011, which the Bermuda Monetary Authority circulated for consultation. It explains proposed amendments to the Insurance Act 1978 that would give the Authority a broader suite of civil enforcement tools modelled on powers already in the Investment Business Act 2003 and AML legislation, replacing some existing criminal offences with civil penalties and formalising due process for enforcement actions.

• Civil fines and penalties: Introduces civil penalties (up to $500,000) for breaches of the Act or failure to comply with requirements or directions, and revises fixed civil penalties for late filing of returns based on insurer class.
• Prohibition orders: Allows the Authority to prohibit an individual from performing specified functions (e.g. director, CEO, actuary, underwriter) where they are not fit and proper; breach is a criminal offence and licensed entities must not engage a prohibited person.
• Public censure: Empowers the Authority to publish a statement identifying that a registered person has breached a statutory requirement, following due process.
• Injunctions: Gives the Authority power to apply to the court for injunctions compelling or restraining specified conduct.
• Warning and decision notices: Requires the Authority to issue a warning notice before taking enforcement action, allow at least 14 days for submissions, and issue a decision notice (generally within 90 days) confirming any action, with a right of appeal to the appeal tribunal.
• Urgent directions: Permits directions to take immediate effect without a prior warning notice in urgent cases, but the recipient has 14 days to make submissions and the Authority must decide within 28 days whether to confirm, rescind or vary the direction.
• Publication of decisions: Gives the Authority discretion to publish information about a decision notice (subject to prior notice to the person and no publication pending appeal), and makes publication mandatory in certain cases such as cancellation of registration or a prohibition order.
• Increased criminal fines: Raises maximum fines for remaining criminal offences under the Act from $5,000 to $50,000 (summary) and from $15,000 to $150,000 (indictable).
• No double jeopardy: Provides that a person convicted of a criminal offence under the Act cannot also be subject to a civil penalty for the same matter, and that civil penalties may be recovered by the Authority as a civil debt.

The memorandum notes that near-identical amendment bills were being prepared for the Banking, Investment Business, Funds and Trusts sectors as part of a broader move toward uniform enforcement powers across all BMA-regulated Acts. Comments on the draft bill were invited by 28 November 2011; the document does not confirm final enactment or an effective date.

Key obligations

• Insurers and registered persons would become liable to civil penalties (up to $500,000) for breaches of requirements or prohibitions under the Insurance Act 1978, replacing certain existing criminal liability
• Insurers would be liable to a civil penalty (varying by class, from $500 to $5,000 per week or part week) for failing to file statutory statements and returns on time
• Licensed entities would be prohibited from engaging any person who is subject to a prohibition order
• A person receiving a warning notice would have not less than 14 days to make submissions before a decision notice is issued
• In urgent direction cases, the recipient would have 14 days to make submissions against the direction, and the Authority must decide within 28 days whether to confirm, rescind or vary it
• Comments on the draft bill were to be submitted to policy@bma.bm by 28 November 2011

Applies to

insurers, registered persons under the Insurance Act 1978, designated insurers, individuals performing controlled functions (e.g. directors, chief executives, actuaries, underwriters) in the insurance industry

Deadlines

• 28 November 2011: Deadline for submitting comments on the draft Insurance Amendment (Enhancement of Enforcement Powers) Act 2011 to policy@bma.bm
• not less than 14 days: Minimum period given to a person to make submissions after receiving a warning notice, before a decision notice is issued
• 90 days: Maximum period within which the Authority must issue a decision notice
• 14 days: Period within which a person may make submissions against an urgent direction that took effect without a prior warning notice
• 28 days: Period within which the Authority must decide whether to confirm, rescind or vary an urgent direction after submissions are made

Related documents

• This document amends Insurance Act 1978