Insurance Guidance Note #2: Appointment, Role and Qualifications of the Inspector (March 2005)

Summary

This is a Bermuda Monetary Authority Insurance Department guidance note explaining the appointment, role, powers and qualifications of a Section 30 Inspector, a supervisory tool used to investigate the affairs of an insurer under the Insurance Act 1978 (as amended). It clarifies when an Inspector may be appointed, what an inspection involves, reporting and confidentiality rules, and who bears the cost.

• Appointment trigger: The Authority may appoint an Inspector where an investigation of an insurer's affairs is needed in the interest of policyholders (IA 30(1)), or where a Class 4 insurer has failed to file its statutory financial statements or return within 3 months of its filing date (IA 18A(5)).
• Scope and process: Inspections may be full scale or risk focused, are separate from routine prudential visits, and are governed by an instruction letter setting out objectives, responsibilities, timing, reporting and cost allocation.
• Right to information: Insurers under investigation and their past or present officers, employees or insurance managers must produce requested books, records and documents to the Inspector and give reasonable assistance; the Inspector may examine such persons under oath, or apply to the Court to examine others.
• Reporting: The Inspector must report to the Authority periodically and on completion of the investigation; reports and working papers belong to the Authority, and only the final report copy goes to the insurer.
• Confidentiality: Section 30 investigations are held in private and the Authority and Inspector generally must not disclose information received, subject to specific statutory exceptions (consent, information already public, regulatory cooperation, criminal proceedings).
• Qualifications: The Authority assesses whether a proposed Inspector is fit and proper, considering qualifications, professional proficiency, experience, professional body membership and conflicts of interest.
• Costs: Expenses of the inspection are payable by the insurer to the Authority unless the Authority directs otherwise.

The note also flags a general compliance expectation tied to the Insurance Amendment Act 2004: insurers must take immediate steps to comply with changes it introduced, and for other Guidance Note matters the Authority expected compliance as soon as possible and, in any event, not later than 31 December 2005 unless a later date was agreed with the Authority.

Key obligations

• Insurers under investigation and their past or present officers, employees or insurance managers must produce all requested books, records and documents to the Inspector and give reasonable assistance (IA 30(2)).
• Such persons may be required to submit to examination under oath by the Inspector, or by the Court on the Inspector's application, regarding the insurer's business (IA 30(3)).
• The Inspector must report to the Authority from time to time and on completion of the investigation, and must not disclose information obtained to anyone other than the Authority except via the final report to the insurer (IA 30(4), IA 52(1)).
• The insurer must pay the expenses of the inspection to the Authority unless the Authority directs otherwise (IA 30(5)).
• Insurers must take immediate steps to comply with changes introduced by the Insurance Amendment Act 2004, and were expected to come into compliance with other Guidance Note matters no later than 31 December 2005 unless a later date was agreed with the Authority.

Applies to

insurers, Class 4 insurers, insurance managers, officers and employees of insurers, Inspectors appointed under Section 30

Deadlines

• 31st December 2005: Expected date by which insurers should come into compliance with matters addressed in the Guidance Notes, unless a later date is agreed with the Authority (compliance with Insurance Amendment Act 2004 changes was expected immediately).
• within 3 months of filing date: Failure by a Class 4 insurer to file its statutory financial statements or return within this period may trigger appointment of an Inspector under IA 18A(5).