Stakeholder Letter - Brokers and Agents CoC and Annual Return (2018-12-13)

Summary

This is a stakeholder letter from the Bermuda Monetary Authority responding to industry feedback on two proposed instruments: the Insurance Brokers and Insurance Agents Code of Conduct, and the Insurance (Prudential Standards) (Brokers and Agent Annual Return) Rules 2018. It works through specific stakeholder comments paragraph by paragraph and records the Authority's decisions, including several wording changes it agreed to make to the final Code and Rules.

• Annual return duplication: The Authority will consider accepting overlapping data from multi-licensed entities but still requires separate filings per licence, since data feeds its predictive analytics (DAPA); entities may copy across identical information rather than re-enter it.
• Staff turnover disclosure: The requirement to report other staff/employees working for managed insurers stands as proposed; the Authority does not consider this too onerous since the return is a point-in-time annual snapshot.
• Domestic vs international brokers: The Authority declined to treat domestic and international brokers separately, noting this is addressed instead through proportionality based on nature, scale and complexity of business.
• Group policies and procedures: Group-level policies may be cascaded to the Bermuda entity provided there is evidence of ratification by the Bermuda board (e.g. minuted), with Bermuda-specific nuances reflected, potentially as an appendix.
• Effectiveness assessments (Para 15): The Code will be amended to clarify that periodic assessments relate to the risk and control framework.
• Professional indemnity (Para 19): Indemnity insurance requirements apply to both brokers and agents but proportionality will be applied based on nature, scale and complexity.
• Placing business with other agents (Para 21): Agents may only place business with Bermuda-registered insurers unless permitted by their Certificate of Registration or approved by the Authority; agent-to-agent placement generally will not be allowed and requires case-by-case approval.
• Brokerage/commission disclosure (Paras 28-29): The Authority agreed to remove the agent reference from the brokerage/commission disclosure requirement and to delete the requirement to "discuss and agree" terms of business with every client.
• Complaints handling (Para 34): Licensed entities must have documented complaint-handling procedures; for brokers this focuses on customers, while for agents it extends to insurers they represent, often covered contractually.
• Indemnity cover changes (Para 46(c)): The Authority agreed to insert the word "material" so that only material changes to indemnity cover need to be notified to the Authority.
• Dual-licensed filings (Rules Section 3): Entities with dual licences (e.g. insurance manager and insurance agent) must still file separate annual returns, though identical data may be copied across returns.
• Schedule III filing (Section 3(2A)): The Authority agreed to clarify that an entity files either Section I (if a company) or Section J (if a partnership, sole proprietorship or individual) of Schedule III, not both.
• Annual return attachments (Section 3(3)): The reference to submitting a "BSCR model" alongside management accounts and the business plan was an error and has been deleted from the requirement.

The letter is a consultation response record rather than the final legal text of the Code or Rules; it signals the substantive positions and amendments the Authority intends to carry into the finalised instruments, so readers should confirm final wording once the Code and Rules are formally issued.

Key obligations

• Insurance Agents may only place insurance business with insurers registered in Bermuda, or as permitted by their Certificate of Registration, or otherwise with the prior approval of the Authority
• Agents seeking to place business with another insurance agent must obtain prior Authority approval on a case-by-case basis
• Licensed brokers and agents must notify the Authority of any material change to their professional indemnity cover
• Licensed entities must maintain documented complaint-handling procedures communicated to policyholders, potential policyholders, clients or insurers as applicable
• Group policies and procedures adopted by a Bermuda broker or agent must be ratified by the Bermuda board, with evidence such as board minutes
• Dual-licensed entities (e.g. insurance manager and insurance agent) must file separate annual returns for each licence, though duplicate data may be copied across filings
• Entities filing Schedule III must complete only Section I (if a company) or Section J (if a partnership, sole proprietorship or individual), as applicable
• Annual returns must be accompanied by management accounts for the financial year and a business plan for the next financial year

Applies to

Insurance Brokers, Insurance Agents, Insurance Managers, dual-licensed insurance entities