Response to the Insurance Code of Conduct Consultation Paper Comments (2010-02-10)

Summary

This is a response letter from the Bermuda Monetary Authority summarising the comments received during the consultation on the draft Insurance Code of Conduct and explaining how the Authority addressed each comment. It confirms the Code's implementation and compliance timetable and clarifies several provisions of the draft Code rather than imposing new requirements itself.

• Parent's board: Wording amended to specify the number of non-executive directors that may form part of the parent's board.
• Board oversight responsibilities: Introductory wording reworded to be less prescriptive while keeping the list of responsibilities.
• Annual review of policies and procedures: Board must still review and approve significant policies and procedures annually (not just changes); the words at least annually were removed from two paragraphs as this is already covered elsewhere in the Code.
• Market discipline and disclosure: Authority confirms in writing that Section 7 of the Code applies only to Domestic Insurers writing retail business.
• Risk management framework: Requirement to measure all material risk changed to a requirement to assess material risk.
• Risk appetite and exposures: Provisions reworded to speak generally about managing exposures and setting concentration and allocation limit policies, rather than prescribing a specific method.
• Operational risk: Operational risk capital charge is not a substitute for sound operational risk management; related Code requirements are retained.
• Capture and track systems: Requirement to capture and track operational and near miss data is retained, consistent with Solvency II and IAIS standards.
• Strategic risk management: Provision reworded to speak generally about measuring, monitoring, mitigating and responding to exposures.

The letter reiterates that the Code will be implemented on 1 July 2010 and that the Authority expects (re)insurers to achieve compliance by 31 December 2010, and offers ongoing assistance to the industry during that transition.

Key obligations

• (Re)insurers are expected to achieve compliance with the Insurance Code of Conduct by December 31 2010.
• Domestic Insurers writing retail business must comply with Section 7 (Market Discipline and Disclosure) of the Code.
• Boards of (re)insurers must review and approve significant policies and procedures annually.
• (Re)insurers must capture and track operational risk and near miss data as required by the Code.

Applies to

(Re)Insurers, Domestic Insurers writing retail business

Deadlines

• July 1st 2010: Date on which the Insurance Code of Conduct is implemented.
• December 31st 2010: Date by which the Authority expects insurers to achieve compliance with the Code.