Summary of Comments on Guidance Note on Role of the Approved Auditor

Summary

This document is the Bermuda Monetary Authority's summary of industry comments on its draft Guidance Note on the Role of the Approved Auditor, together with the Authority's responses and resulting clarifications. It does not itself impose new rules, but it clarifies how existing Insurance Act requirements on auditor appointment, approval and reporting are to be interpreted.

• Auditor appointment: There is no requirement under the Insurance Act for annual reappointment or re-approval of an approved auditor; Authority approval is needed only on initial appointment or when changing auditors, and has no time limit.
• Companies Act vs Insurance Act: An auditor can be appointed under the Companies Act by members and later ratified by directors after Authority approval under the Insurance Act; an Insurance Act application can be made after a Companies Act appointment of the same auditor.
• Confidentiality: The Authority agreed to reinstate wording confirming it will comply with Insurance Act 1978 confidentiality provisions regarding information obtained from approved auditors' working papers.
• Letter of undertaking: The Authority will retain and amend the Guidance Note to continue requiring a letter of undertaking from candidate auditors.
• Administrative auditor changes: Prior Authority approval is not required where the same audit firm continues (e.g. a partnership converting to a corporate entity) but insurers should seek clarification from the Authority in cases of doubt, since sections 16 and 16A of the Insurance Act govern changes in auditor.
• Reporting requirements: Where the Guidance Note is silent, GAAS will apply; references to deficiencies relate to the audit process, not the insurer's internal controls; the valuation disagreement reporting trigger will be amended to require material impact on statutory financial statements; and the definition of material weakness in internal control will be amended to align with GAAS wording.

Overall, the document confirms that the finalised Guidance Note will incorporate several amendments (confidentiality wording, letter of undertaking retention, materiality threshold for valuation disagreements, and GAAS-aligned definitions) but does not itself set new deadlines or filing obligations beyond restating existing Insurance Act auditor appointment and approval requirements.

Key obligations

• Every insurer must appoint an auditor approved by the Bermuda Monetary Authority under the Insurance Act.
• Insurers must obtain Authority approval when initially appointing an auditor and whenever changing auditors, but not annually.
• Candidate auditors must submit a letter of undertaking to the Authority as part of the approval process.
• Insurers should approach the Authority for clarification where there is doubt as to whether a change in auditor arrangement requires prior approval under sections 16 and 16A of the Insurance Act.

Applies to

insurers, approved auditors, audit firms