Special Issue of Supervisory Circular - Business Continuity and Disaster Preparedness - May 2018 (2018-09-25)

Summary

This is a CIMA supervisory circular reminding Class 'A' Property and Casualty Insurers of their existing obligations around business continuity and disaster recovery planning, issued in the context of the severe 2017 hurricane season and expectations for an active 2018 season. It does not create new rules but reiterates and elaborates on requirements already found in CIMA's Statement of Guidance on Business Continuity Management (SOG BCM), Statement of Guidance on Market Conduct for Insurers, Agents and Brokers (SOG Market Conduct), and Statement of Guidance on Internal Controls for Insurance (SOG IC).

• Business Continuity Plans: Boards and senior management of Class 'A' insurers are responsible for ensuring effective, tested, and regularly updated BCPs covering critical functions such as data access, claims processing, and customer communication during major disruptions like hurricanes.
• Broker coverage: Where insurers operate through Cayman-based insurance brokers, their BCPs must also cover those brokers' operations.
• Underwriting management: Insurers must ensure customers are informed about underinsurance risk and receive accurate, understandable information.
• Claims management: Insurers must have documented, fair, and timely claims handling procedures, including plans for surges in claims volume post-disaster and appropriate use of loss adjusters.

Overall, the document is informational and reminder guidance directed at the insurance sector, drawing on lessons from Hurricane Ivan (2004) and the 2017 hurricane season, and it encourages insurers to test, audit, and improve their disaster preparedness measures. It does not set out new filing deadlines or formal compliance dates.

Key obligations

• Class 'A' Property and Casualty Insurers must maintain up-to-date, regularly tested Business Continuity Plans (BCPs) covering critical functions such as data access, claims processing, and customer communication.
• Where an insurer conducts business through Cayman Islands insurance brokers, its BCP must also cover the operations of those brokers.
• Boards and senior management must ensure effective and comprehensive business continuity policies and procedures are in place.
• Insurers must conduct simulation exercises to test BCPs and remediate any deficiencies identified.
• Insurers should subject their BCPs to independent audit and review for objectivity and effectiveness.
• BCPs must address post-event disaster recovery functions, including alternate site activation, access to backup data, and management of high claims volumes.
• Insurers must advise clients of underinsurance risks and provide recommendations for remedying underinsurance, per SOG Market Conduct.
• Insurers must ensure information provided to insureds is accurate, understandable, not misleading, and accessible in writing or electronically.
• Insurers must have documented policies and procedures for fair and timely claims handling, consistent with SOG Market Conduct and SOG IC.
• Insurers' BCPs must comprehensively address claims handling procedures during major disruptions, including staffing and training for claims surges.
• Insurers should ensure claim contact details, complaints, and claims procedures are stated clearly and simply within policy documents.
• When using loss adjusters, insurers must ensure the adjusters have adequate local market knowledge and relevant expertise.

Applies to

Class 'A' Property and Casualty Insurers, Insurance Brokers (as they relate to Class 'A' insurers' operations)