Stakeholder Letter: Consultation Paper - Conduct of Business Regulatory Regime: Revisions to the Insurance Code of Conduct (2021-12-07)

Summary

This is a stakeholder letter from the Bermuda Monetary Authority summarising its responses to industry feedback on a Consultation Paper proposing revisions to the Insurance Code of Conduct, particularly new conduct of business principles for insurers writing domestic retail business. It clarifies several points raised by stakeholders but does not itself finalise or bring into force any new Code provisions.

• Retail business definition: SMEs remain outside the Act's definition of retail business for now; the Authority may explore this further in future but is not changing the definition at this time.
• Territorial scope: The Code applies only to Bermuda licensed insurers, not to overseas affiliates or group members regulated elsewhere; the conduct of business changes do not extend the Code's applicability to entities not already covered.
• Conflicts of interest: Insurers are expected to have policies and procedures to identify and manage conflicts of interest arising in normal business, including commercially adverse transactions such as reinsurance.
• Fair treatment of policyholders: Section 8.2.1 will be amended so that only policies require Board approval, while procedures need approval only at senior management level in line with the firm's existing control structure.
• Authorised sales representatives: This term retains its existing meaning and normally includes third-party brokers and intermediaries contracted to sell an insurer's products.
• Product suitability and authorised intermediaries: Both insurers and any third parties they contract (brokers, intermediaries, tied agents) share responsibility for suitability of advice; insurers should conduct due diligence on third parties and make them aware of applicable Code provisions.
• Legal obligations wording: A general comply with all laws covenant in an intermediary agreement will satisfy the legal obligation wording in paragraph 84(a).
• Terms of business: The Authority will amend wording to acknowledge that terms of business may be satisfied by disclosure within the insurance contract itself, as is typical for life insurance.

The Authority intends to finalise the Code based on this feedback, but first requires amendments to the Bermuda Monetary Authority Act 1969 to give it a clear conduct of business mandate, and completion of a further forthcoming consultation. Once the final Code is issued, a transition period will be recommended and communicated to insurers to allow them to come into compliance; no such deadline has yet been set.

Applies to

Bermuda licensed insurers, insurers writing domestic retail business, authorised intermediaries and tied agents, third-party brokers and intermediaries