Insurance Department Guidance Note #5: Fit and Proper Criteria and Approval Process for the Approved Auditor (March 2005)

Summary

This Bermuda Monetary Authority Insurance Department guidance note explains the fit and proper criteria and approval process that apply to the Approved Auditor of a registered insurer. It sets out what the Authority expects insurers to check before appointing an auditor, the criteria the Authority itself uses when approving a candidate, and the information required to complete the approval.

• Who it applies to: All insurers registered under the Insurance Act 1978 and all auditors approved (or seeking approval) by the Authority as an insurer's Approved Auditor.
• Fit and proper criteria: A candidate will generally be considered fit and proper if they are a member in good standing of the Institute of Chartered Accountants of Bermuda (ICAB), ordinarily resident in Bermuda, and independent of the insurer.
• Insurer's duties before appointment: The insurer must assess whether its candidate meets eligibility and fit and proper criteria, confirm the auditor's independence, and consider whether the auditor has access to relevant specialist skills such as actuarial expertise.
• Ongoing monitoring: If an insurer becomes aware that its Approved Auditor is no longer independent or no longer fit and proper, it must take timely steps to appoint an auditor who is.
• Information for approval: To obtain the Authority's approval of a new Approved Auditor, the Authority requires (where applicable) a written explanation from the outgoing auditor for ceasing appointment, a written explanation from the insurer for the change of auditor, and a Letter of Undertaking from the new candidate.
• Confirmation: Once approved, the Authority issues the insurer a letter confirming approval of the candidate as Approved Auditor.

The guidance also notes that insurers and Approved Auditors must take immediate steps to comply with changes introduced by the Insurance Amendment Act 2004, and are encouraged to come into compliance with other matters in the guidance as soon as possible and in any event by 31 December 2005, unless a later date is agreed with the Authority.

Key obligations

• Insurers must assess whether a candidate for Approved Auditor meets the Authority's eligibility and fit and proper criteria before appointment, including integrity, competency, resources, qualifications, experience and independence.
• Insurers must take timely steps to confirm the independence of a proposed Approved Auditor and seek confirmation from the auditor as appropriate.
• If an insurer becomes aware that its Approved Auditor is no longer independent or no longer fit and proper, it must take timely steps to secure an independent and/or fit and proper auditor.
• Insurers must provide information requested by the Authority to demonstrate that a candidate (or incumbent) Approved Auditor is independent and meets the eligibility and fit and proper criteria.
• Before accepting an engagement, the Approved Auditor should be satisfied that the examination required by the Act is within the collective professional expertise and proficiency of the auditor and engagement team.
• Where applicable, a written explanation must be provided by the previous Approved Auditor for ceasing the appointment, and by the insurer for the change in Approved Auditor, along with a Letter of Undertaking from the new candidate, before the Authority will approve the appointment.
• Insurers and Approved Auditors must take immediate steps to comply with changes introduced by the Insurance Amendment Act 2004.
• Insurers are expected to come into compliance with other matters in the guidance not later than 31 December 2005 or a later date agreed with the Authority.

Applies to

insurers registered under the Insurance Act, Approved Auditors (natural persons or firms of accountants approved as an insurer's independent auditor)

Deadlines

• 31st December 2005: Deadline (or later date agreed with the Authority) by which insurers are encouraged to come into compliance with matters addressed in this guidance, other than the Insurance Amendment Act 2004 changes.
• immediate: Insurers and Approved Auditors must take immediate steps to comply with changes introduced by the Insurance Amendment Act 2004.