Insurance Department Guidance Note #9: Fit and Proper Criteria and Approval Process for Approved Actuary (March 2005)

Summary

This is Bermuda Monetary Authority Insurance Department Guidance Note #9, setting out the fit and proper criteria and approval process for an insurer's Approved Actuary. It applies to all insurers registered as Long-term insurers under the Insurance Act, and to individuals seeking or holding approval as an Approved Actuary. The Approved Actuary's core role is to opine on the adequacy of an insurer's Total Long-term Business Insurance Reserves reported in statutory financial statements and returns.

• Insurer duties: Before appointing a candidate, the insurer must assess whether the person meets the Authority's fit and proper criteria (integrity, competency, resources, qualifications and experience) commensurate with the nature, scale and complexity of its business.
• Ongoing monitoring: If an insurer becomes aware its Approved Actuary is no longer fit and proper, it must promptly replace them with someone meeting the criteria.
• Information requests: Insurers must provide information to the Authority on request to demonstrate that a candidate or incumbent Approved Actuary meets the eligibility and fit and proper criteria.
• Actuary's own diligence: Before accepting and on an ongoing basis, the candidate must be satisfied the work is within their professional expertise and that they have no conflicts of interest affecting objectivity.
• Disclosure and undertaking: An Approved Actuary who is an employee or consultant of the insurer must disclose that relationship to the Authority and confirm in a Letter of Undertaking the absence of conflicts of interest.
• Fit and proper criteria: A person is generally considered fit and proper if they are a member in good standing of a recognized actuarial body, meet education and examination requirements to sign statutory reserve opinions, and have relevant reserve evaluation experience.
• Excluded roles: A person will not be approved as Approved Actuary if they are the CEO, COO, CFO, a director, a person with underwriting authority, or otherwise in a role the Authority views as creating a conflict of interest.
• Approval process documentation: The Authority requires a resume, evidence of professional membership, a Letter of Undertaking, and, where applicable, written explanations regarding any change or resignation of the Approved Actuary, before approving an appointment.
• Certificate of approval: On approval, the Authority issues a certificate of approval, which may restrict approval to specific lines of business if broad insurance expertise has not been demonstrated.

The Guidance reflects minimum standards the Authority expects Approved Actuaries to observe at all times. For changes arising from the Insurance Amendment Act 2004, Approved Actuaries must take immediate steps to comply; for other matters in the Guidance, compliance is expected as soon as possible and in any event by 31 December 2005, or a later date agreed with the Authority.

Key obligations

• Insurers must assess whether a candidate Approved Actuary meets the Authority's fit and proper criteria before appointment.
• Insurers must promptly replace an Approved Actuary who is found no longer fit and proper.
• Insurers must provide information to the Authority on request to demonstrate a candidate's or incumbent's continued compliance with fit and proper criteria.
• Candidate Approved Actuaries must be satisfied, before accepting appointment and on an ongoing basis, that the work is within their professional expertise and that they have no disqualifying conflicts of interest.
• Approved Actuaries who are employees or consultants of the insurer must disclose that relationship to the Authority and confirm absence of conflicts in a Letter of Undertaking.
• Insurers seeking approval of an Approved Actuary must submit a resume, evidence of professional membership, a Letter of Undertaking, and, where applicable, explanations regarding changes or resignation of a previous Approved Actuary.
• Approved Actuaries must come into compliance with changes from the Insurance Amendment Act 2004 immediately, and with other Guidance requirements by 31 December 2005 or a later agreed date.

Applies to

Long-term insurers registered under the Insurance Act, Approved Actuaries

Deadlines

• 31st December 2005: Deadline by which Approved Actuaries are expected to come into compliance with other matters contained in the Guidance Notes, unless a later date is agreed with the Authority.
• immediate: Approved Actuaries must take immediate steps to comply with changes in legislation contained in the Insurance Amendment Act 2004.