BMA Guidance Note - Role of the Approved Auditor for Class 3A, 3B, 4, C, D and E Insurers and Insurance Groups (June 2016)

Summary

This BMA Guidance Note explains the role, approval process and ongoing duties of the approved auditor for Bermuda registered Class 3A, 3B, 4, C, D and E insurers and for insurance groups supervised by the Authority. It sets out the Authority's expectations for insurers, designated insurers and their auditors under the Insurance Act 1978 and related Rules, covering appointment, approval criteria, disqualification, and reporting obligations to the BMA.

• Appointment: Every insurer must appoint a BMA approved auditor for statutory and additional GAAP financial statements; designated insurers must ensure their group appoints an approved group auditor.
• Notification: Insurers must notify the BMA in writing of a proposed auditor prior to registration, and notify any change in that information within fourteen days.
• Approval criteria: The BMA assesses proposed auditors on fitness and propriety, independence from the insurer or group, and a letter of undertaking to comply with the Act, GAAP or IFRS and recognised auditing standards.
• Change of auditor: Prior BMA approval is required before appointing a new auditor, and written notice must be given for removal, replacement, resignation or non reappointment of an approved auditor.
• Audit requirements: Insurers must prepare audited statutory financial statements and additional GAAP financial statements each financial year (unless exempted) and file a statutory financial return with these statements.
• Reporting to the Authority: Approved auditors must give written notice to the BMA of material qualifications, adverse opinions, or facts of material significance to the Authority's functions, and must cooperate with BMA inspections including providing access to working papers.

The Guidance Note reflects minimum standards the Authority expects insurers, designated insurers and approved auditors to observe at all times, and is not a substitute for the provisions of the Insurance Act 1978 and associated Rules.

Key obligations

• Every Class 3A, 3B, 4, C, D and E insurer must appoint a BMA approved auditor for its statutory financial statements and additional GAAP financial statements.
• A designated insurer must ensure the group of which it is a member appoints a BMA approved group auditor for group financial statements.
• Insurers must notify the BMA in writing of a proposed auditor prior to registration and notify any change in that information within fourteen days of the change.
• Insurers or designated insurers must obtain prior BMA approval before appointing a new approved auditor.
• Insurers or designated insurers must give written notice to the BMA if an approved auditor is to be removed before term expiration or replaced at term expiration.
• An approved auditor must give written notice to the BMA if he resigns before term expiration, becomes aware he will be replaced, or does not intend to seek reappointment.
• Insurers must prepare audited statutory financial statements and additional GAAP financial statements each financial year unless an exemption or modification has been obtained.
• Every Class 3A, 3B, 4, C, D and E insurer must file a statutory financial return and additional GAAP financial statements at the same time it files its statutory financial statements.
• An approved auditor must give written notice to the BMA of a material qualification, denial of opinion, or adverse opinion, and provide a copy of the report as soon as possible.
• An approved auditor must give written notice to the BMA of any fact or matter likely to be of material significance to the Authority's functions, such as fraud, going concern doubt, material misstatements, material weaknesses, or unresolved disagreements with management.
• Insurers or designated insurers must take timely steps to appoint an independent, fit and proper auditor if they become aware their approved auditor no longer meets the independence or fit and proper criteria.
• Approved auditors must cooperate with BMA inspections, including providing access to working papers and confirming cooperation in writing when requested.

Applies to

Class 3A insurers, Class 3B insurers, Class 4 insurers, Class C insurers, Class D insurers, Class E insurers, designated insurers, insurance groups, approved auditors

Deadlines

• within fourteen days of the change: Insurer must provide written notice to the Authority of any change in the information provided regarding its proposed auditor.
• within fourteen days: If an insurer fails to appoint or fill a vacancy for an approved auditor, the Authority may appoint one and fix remuneration if not previously agreed by the insurer and auditor within this period.