Insurance Guidance Note #1: Role of the Principal Representative (March 2005)

Summary

This is a Bermuda Monetary Authority Guidance Note explaining the legal role, appointment and duties of the Principal Representative that every registered insurer must maintain in Bermuda. It clarifies how the Authority interprets the relevant sections of the Insurance Act 1978 (as amended) and related Regulations, and sets out the Authority's expectations for compliance.

• Appointment: Every registered insurer must appoint a Principal Representative resident in Bermuda and maintain a principal office in Bermuda; the appointment requires the Authority's approval.
• Notification: Insurers must notify the Authority in writing at registration of the principal office location and Principal Representative's particulars, and of any later changes within 14 days.
• Termination notice: Neither the insurer nor the Principal Representative may end the appointment with less than 30 days' written notice to the Authority (or a shorter period the Authority permits).
• Reportable events: The Principal Representative must notify the Authority forthwith of specified reportable events (e.g. likely insolvency, breach of conditions, involvement in criminal proceedings, cessation of business) and follow up with a written report within 14 days.
• Dividend affidavits (Class 4): A Class 4 insurer paying dividends exceeding 25% of prior year's statutory capital and surplus must file a solvency/liquidity affidavit signed by at least two directors and the Principal Representative at least 7 days before payment.
• Records and information access: Insurers must maintain adequate books and records in Bermuda (receipts/expenditures, premiums and claims, assets/liabilities/equity) accessible to the Principal Representative, and provide an agents list to the Authority on request.

The Authority treats this Guidance as the minimum standard expected of insurers at all times. For matters arising from the Insurance Amendment Act 2004, insurers must comply immediately; for other guidance matters, insurers are encouraged to come into compliance as soon as possible and, in any event, by 31 December 2005 unless a later date is agreed with the Authority.

Key obligations

• Every registered insurer must appoint a Principal Representative resident in Bermuda and maintain a principal office in Bermuda (IA 8(1)).
• Insurers must obtain the Authority's approval for the appointment of the Principal Representative (IA 8(1A)).
• At registration, insurers must give written notice to the Authority of the principal office location and Principal Representative's particulars (IA 8(2)).
• Insurers must notify the Authority within 14 days of any change to the principal office or Principal Representative particulars (IA 8(3)).
• Neither the insurer nor the Principal Representative may terminate the appointment with less than 30 days' written notice to the Authority, or such shorter notice as the Authority permits (IA 8(3A)).
• The Principal Representative must notify the Authority forthwith of any reportable event and provide a written report with full particulars within 14 days (IA 8A(1)).
• A Class 4 insurer paying dividends exceeding 25% of the prior year's total statutory capital and surplus must file, at least 7 days before payment, an affidavit signed by at least two directors and the Principal Representative confirming solvency and liquidity margins are not breached (IA 31B(1)).
• Insurers must maintain at the principal office an accurate list of insurance agents in Bermuda and provide it to the Authority upon written request (IA 8(4)).
• Insurers must maintain adequate books and records in Bermuda covering receipts/expenditures, premiums and claims, and assets/liabilities/equity, accessible to the Principal Representative.
• Insurers must come into compliance with matters covered by this Guidance as soon as possible, and no later than 31 December 2005 unless a later date is agreed with the Authority; compliance with changes from the Insurance Amendment Act 2004 must be immediate.

Applies to

registered insurers, Class 4 insurers, non-resident insurance undertakings (NRIUs), Principal Representatives, insurance management companies

Deadlines

• within fourteen days after the alteration is made: Insurer must notify the Authority of any change to principal office or Principal Representative particulars.
• thirty days' written notice: Minimum notice required to the Authority before terminating a Principal Representative's appointment, unless a shorter period is permitted by the Authority.
• within 14 days: Principal Representative must provide a written report to the Authority following notification of a reportable event.
• at least 7 days before payment of dividends: Class 4 insurer must file the required solvency/liquidity affidavit before paying dividends exceeding 25% of prior year's statutory capital and surplus.
• 31st December 2005: Target date by which insurers are encouraged to come into compliance with matters covered in this Guidance, unless a later date is agreed with the Authority.