Guidance Note - Role of the Approved Auditor for Class 1, 2, 3, A, B and Special Purpose Insurers (June 2016)

Summary

This Bermuda Monetary Authority guidance note explains the role, appointment, and responsibilities of the approved auditor for Class 1, 2, 3, A, B and Special Purpose insurers under the Insurance Act 1978 and related regulations. It sets out the Authority's approval criteria for auditors, the audit and reporting requirements insurers and auditors must meet, and the circumstances requiring communication with the Authority.

• Appointment: Every insurer must appoint an auditor approved by the Authority to audit its statutory financial statements; if it fails to do so, the Authority may appoint one and fix remuneration.
• Notification: Insurers must notify the Authority in writing of a proposed auditor prior to registration, and of any change in that information within 14 days.
• Approval criteria: The Authority assesses proposed auditors for fitness and propriety, independence from the insurer, and a letter of undertaking to comply with the Act and recognised auditing standards.
• Change of auditor: Insurers must obtain prior Authority approval before appointing a new auditor, and both insurer and outgoing auditor must give written notice explaining the change.
• Access to information: Insurers must ensure the approved auditor has access to accounting records, relevant staff, and records held by material outsourcing suppliers.
• Audit and reporting: Insurers must prepare audited statutory financial statements each year (unless exempted) and file a statutory financial return with them; the auditor's report must follow the prescribed IRASR form and address specified opinions.
• Reporting to the Authority: Auditors must give prompt written notice to the Authority of material report qualifications, adverse opinions, going concern doubts, material misstatements, internal control weaknesses, or other matters of material significance under section 16A(1)(e).
• Cooperation with inspections: Approved auditors are expected to cooperate with the Authority's prudential reviews, including providing access to working papers and confirming this in writing.

The note reflects the Authority's minimum expectations and may be revised from time to time, with material changes published as a new version.

Key obligations

• Every insurer must appoint an auditor approved by the Authority to audit its statutory financial statements (section 16(1) of the Act).
• Insurers must notify the Authority in writing of their proposed auditor prior to registration.
• Insurers must give the Authority written notice within 14 days of any change to the proposed auditor information provided.
• Insurers must obtain prior Authority approval before appointing a new auditor when there is a change in approved auditor.
• Insurers proposing to remove or replace an approved auditor must give written notice to the Authority, and provide a written explanation for the change.
• Approved auditors must give written notice to the Authority if they resign early, become aware they will be replaced, or do not intend to seek re-appointment.
• If an insurer becomes aware its approved auditor is no longer independent or fit and proper, it must take timely steps to appoint a replacement.
• Insurers must ensure the approved auditor has access to accounting records, relevant personnel, and records held by material outsourcing suppliers.
• Insurers must prepare statutory financial statements for each financial year audited by the approved auditor, unless exempted by the Authority.
• Every Class 1, 2, 3, A, B and Special Purpose insurer must file a statutory financial return at the time it files its statutory financial statements.
• The approved auditor must prepare an auditor's report in the form prescribed by section 7 of the Insurance Returns and Solvency Regulations 1980, addressed to the Authority.
• The approved auditor must give written notice to the Authority as soon as possible of any material modification, qualification, denial or adverse opinion in its report.
• The approved auditor must give written notice to the Authority under section 16A(1)(e) upon becoming aware of facts or matters of material significance to the Authority's functions.
• Approved auditors are expected to confirm in writing their cooperation with the Authority's inspection process, including providing access to working papers.

Applies to

Class 1 insurers, Class 2 insurers, Class 3 insurers, Class A insurers, Class B insurers, Special Purpose insurers, approved auditors

Deadlines

• 14 days: If an insurer fails to appoint or fill a vacancy for an approved auditor, the Authority may appoint one and fix remuneration within 14 days.
• 14 days of the change: Insurer must provide written notice to the Authority of any change in the proposed auditor information previously notified.