BERMUDA Law and Practice Contributed by: Brad Adderley, Matthew Carr, Max Tetlow, Cathryn Minors, Josephine Noddings, Aleisha Hollis, Melinda Mayne, Milaun Perott and Mya Gibbons, Appleby
Conduct of Insurers All insurers must comply with the BMA’s Insurance Code of Conduct (the “Code”), setting out the duties, requirements and standards with which insurers are to comply when conducting business. The Code requires insurers to establish and maintain a sound corporate governance framework, providing for appropriate oversight of the insurer’s business and outsourcing, effective risk management and an internal controls framework that has regard for international best prac- tice on risk management and internal controls, in order to adequately protect policyholder interests. The ultimate responsibility for sound and prudent governance and oversight of the insurer rests with the Board. In this regard, the Board is responsible for ensuring corporate governance policies and practices are developed and applied in a prudent manner that promotes the Board’s efficient, objective and inde- pendent judgement and decision-making. The Board must also have adequate powers and resources to discharge its duties fully and effectively. Adequate resources, such as sufficient funding, staff and facilities, should be allocated to the Board to enable the board members to carry out their roles and responsibilities efficiently and effectively. In addi- tion, the Board should have access to the services of external consultants or specialists where necessary or appropriate, subject to criteria (such as independ- ence) and due procedures for the appointment and dismissal of such consultants or specialists. For an insurer that is registered in Bermuda, the Board should have independent non-executive directors (ie, directors who are free from any business or other association, including those arising out of current beneficial ownership, existing or past involvement in management of the insurer or as a customer, supplier or adviser that could materially interfere with the exer- cise of independent judgement in the best interests of the insurer and its policyholders). Individual members of the Board must: • act in good faith, honestly and reasonably; • exercise due care and diligence;
• act in the best interests of the insurer and policy- holders; • exercise independent judgement and objectivity in their decision-making; and • ensure appropriate policies and procedures exist to deal with conflicts of interest effectively. As there are varying risk profiles of insurers, the BMA interprets the Code based on the nature, scale and complexity of the business of each insurer. The Board and the chief and senior executives should adopt an effective risk management and internal con- trols framework. The framework should have regard for international best practices on risk management and internal controls. This includes ensuring the fit- ness and propriety of the individuals responsible for the management and oversight of the insurer’s risk management framework. The risk management frame- work should be embedded in both the organisational structure and strategic oversight process, supported by appropriate controls, policies and procedures. The material risks to be addressed by the risk manage- ment framework include the: • insurance underwriting risk; • investment, liquidity and concentration risk; • market risk; • credit risk; • systems, cyber and operations risk (operational risk); • group risk; • strategic risk including emerging risk; • systemic and reputational risk; • legal/litigation risk; and • ESG risk. The “prudent person” principle requires that an indi- vidual entrusted with the management of a client’s funds may only invest in instruments that any rea - sonable individual with objectives of capital preserva- tion and return on investment would own. In relation to the insurer, this principle requires that the insurer, in determining the appropriate investment strategy and policy, may only assume investment risks that it can properly identify, measure, respond to, monitor, control and report while taking into consideration its capital requirements and adequacy, short-term and
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