Stakeholder Letter - Revisions to the Insurance Code of Conduct (2022-08-26)

Summary

This is a stakeholder letter from the Bermuda Monetary Authority (BMA) responding to industry feedback on its Consultation Paper proposing revisions to the Insurance Code of Conduct (the Code). It clarifies how several revised provisions will be interpreted and applied, and confirms the transition arrangements and effective dates for the amended Code, which is now in force.

• Scope: The Code applies to every insurer registered with the BMA and to designated insurers, including Limited Purpose Insurers (Class 1, 2, 3, IIGB, Special Purpose, Collateralized, Class A and Class B), regardless of group membership; Bermuda registered groups remain separately subject to the Insurance (Group Supervision) Rules 2011.
• Proportionality: The proportionality principle in Section 3 applies across all sections of the Code, including board composition, risk management and business continuity requirements, even where not explicitly stated.
• Independent and non executive directors: New definitions of independent non-executive director and non-executive director are added; insurers must notify the BMA of such appointments under Section 30J of the Insurance Act 1978, and group structure affects whether independence is required on the insurer's board.
• Board governance: Boards must conduct a board effectiveness review at least every three years (or after material change) and must adopt a documented board renewal policy covering appointment, tenure and removal of directors.
• Outsourcing: New outsourcing risk assessment requirements apply prospectively to material outsourcing arrangements, but insurers must still maintain contingency plans for existing arrangements.
• ESG risk: Sustainability Risks are renamed ESG Risks; insurers must develop techniques to measure, monitor, mitigate and respond to climate and other ESG risks as emerging risks, alongside BMA's separate climate risk guidance note issued 11 August 2022.
• Conduct of business: Insurers must document complaint handling procedures (including a complaint register, timely resolution and public accessibility of contact points) and establish balanced, impartial claims dispute resolution procedures.

The revised Code came into force on 1 September 2022, with insurers required to be fully compliant with Sections 1 to 7 by 1 September 2023 and with Section 8 (Conduct of Business) by 1 March 2023.

Key obligations

• Registered insurers and designated insurers must comply with the Insurance Code of Conduct in a manner proportionate to their nature, scale and complexity.
• Insurers must notify the BMA under Section 30J of the Insurance Act 1978 of appointments of independent non-executive directors and non-executive directors.
• Boards must conduct a board effectiveness review at least every three years or upon material change in business activities or risk profile.
• Boards must adopt and document a board renewal policy addressing director tenure, appointment and removal.
• Insurers must conduct risk assessments for material outsourcing arrangements on a prospective basis and maintain contingency plans for existing outsourcing arrangements.
• Insurers must develop techniques to measure, monitor, mitigate and respond to ESG (including climate) risks as emerging risks.
• Insurers must document a complaint handling procedure including a complaint register and publicly accessible complaint contact points.
• Insurers must establish balanced and impartial claims dispute resolution procedures with appropriately qualified staff.
• Insurers must be fully compliant with Sections 1 to 7 of the Code by 1 September 2023 and with Section 8 by 1 March 2023.

Applies to

registered insurers, designated insurers, Limited Purpose Insurers (Class 1, Class 2, Class 3, Class IIGB, Special Purpose Insurer, Collateralized Insurer, Class A, Class B), insurance managers, Bermuda registered insurance groups

Deadlines

• 1 September 2022: Revised Insurance Code of Conduct comes into force.
• 1 September 2023: Deadline for insurers to be compliant with Sections 1 to 7 of the Code.
• 1 March 2023: Deadline for insurers to be compliant with Section 8 (Conduct of Business) of the Code.