Decoded: Adhering to the Insurance Code of Conduct in 2024
Earlier this year, the Bermuda Monetary Authority (BMA) unveiled its comprehensive 2024 business plan, outlining its ambitious goals for the insurance sector including the extension of the Insurance Code of Conduct to insurers. This move is expected to enhance insured protection and promote transparency in the sector, ultimately fostering increased trust between insurers and policyholders.
The business plan has three main goals. First, the BMA will review and update the insurance group supervision regime to include holding company oversight, which will improve risk management and governance. Second, it will integrate environmental, social, and governance (ESG) strategy into the regulatory framework, with a focus on climate change and promoting sustainability. Lastly, it will enhance cyber risk supervision by implementing stronger cybersecurity measures and promoting best practices to protect the insurance sector from cyber-attacks.
In September 2023, the insurance sector witnessed changes with the implementation of the Insurance Code of Conduct (the Code). This marked a commitment to enhancing the Corporate Governance Framework and enhancing language to clarify expectations of the BMA. The BMA’s business plan for 2024 outlined a commitment to strengthening the Code and will be issuing further guidance on several topics this year.
Now with the amendments in effect, insurance companies are facing a new phase of ensuring ongoing success in meeting the Code’s requirements, in addition to Personal Information Protection Act (PIPA) regulations regarding data privacy.
What does the post implementation landscape look like for insurance companies? What should be considerations for achieving long term operational excellence?
Francesca Thomas, VP, Client Risk Management Consulting at Artex in Bermuda, answered some of the biggest questions.
What exactly are the key requirements that companies need to follow as outlined in the Bermuda Insurance Code of Conduct?
Companies operating in Bermuda are expected to adhere to strong governance and oversight standards. This means having a clear organisational structure and defined roles and responsibilities. It's important for companies to establish frameworks that promote accountability, integrity, and ethical behaviour.
Risk management is another crucial aspect of the code. Companies must have comprehensive risk management practices in place. This involves identifying, assessing, and managing risks effectively. It's all about having the right policies and procedures, conducting regular risk assessments, and implementing strategies to mitigate risks.
Transparency and reporting obligations are also emphasised in the code. Companies are required to provide clear and accurate information to policyholders, regulators, and other stakeholders. This includes disclosing important details about products, pricing, and claims processes. Companies must also keep proper records and submit timely and accurate reports to regulatory authorities.
Lastly, the code addresses outsourcing and oversight requirements. If a company decides to outsource certain functions or activities, they need to have proper oversight mechanisms in place. This involves conducting due diligence on service providers, monitoring their performance, and ensuring compliance with laws and regulations. It's also important for companies to have contingency plans in case any risks or disruptions arise from outsourcing arrangements.
How can companies ensure effective governance and oversight in line with the Code's provisions?
It’s important to establish strong governance structures that provide a clear framework for decision-making and accountability. This means defining clear roles and responsibilities for the board of directors and senior management, so everyone knows what they're responsible for.
Regular reporting and review mechanisms are also crucial and should include their activities, risks and performance indicators. This helps to keep everyone informed and allows for timely identification and resolution of any issues that may arise.
Independence and accountability are vital. Companies should strive to ensure that decision-making processes are independent and free from conflicts of interest. This can be achieved by having independent directors on the board and implementing measures to prevent any undue influence or bias.
By implementing these practices, companies can effectively adhere to the Code's provisions and foster a culture of effective governance and oversight. It's all about establishing transparent structures, keeping everyone well-informed, and making decisions with integrity and accountability at the forefront. These efforts contribute to building trust and ensuring the long-term success of the organisation.
What role does transparency and reporting play in compliance with the Code, and how can companies achieve this effectively?
Transparency and reporting are critical for complying with the Code. Companies must disclose relevant information to stakeholders, providing clear and accurate disclosures on financial and operational performance. Establishing transparent reporting processes ensures timely and accessible communication, building trust with stakeholders. Adherence to regulatory reporting requirements is also important, keeping up with industry regulations and meeting reporting obligations. Prioritizing transparency and reporting demonstrate a commitment to ethical and responsible business practices, enhancing trust and accountability.
What steps are necessary for companies to ensure compliance with the Code's provisions on outsourcing and oversight?
There are a few important steps they need to take. First, establish clear policies and procedures for their outsourcing arrangements. This means clearly defining what the outsourcing involves, who is responsible for what, and what standards need to be met. It's all about transparency and accountability.
Next, put strong oversight mechanisms in place for their outsourced functions. They should regularly monitor and evaluate the performance of their third-party service providers to make sure they're meeting expectations. It's also important to have open lines of communication with the service providers to address any issues that come up.
Compliance with regulatory requirements and contractual agreements is another key aspect. Companies need to stay updated on the laws and regulations that apply to their industry and make sure their outsourcing arrangements follow these rules. They should also carefully review and negotiate contracts with service providers to ensure everyone knows their rights and responsibilities.
Last but not least, conducting due diligence on potential service providers is essential. Companies should thoroughly research and assess their capabilities, reputation, and financial stability before entering into any agreements. This helps minimize risks and ensures they are partnering with reliable and trustworthy providers.
How can companies leverage compliance with the Code to enhance their reputation and competitiveness?
Companies have a valuable opportunity to leverage compliance with the code of conduct to bolster their reputation and competitiveness. Demonstrating a commitment to best practices showcases integrity and professionalism, which can instill trust among stakeholders, investors, and policyholders. By adhering to the code, companies can differentiate themselves in the marketplace as reliable, ethical, and leaders in implementing best practices. This can give them a competitive edge over their rivals and enhance their overall standing in the industry.
Francesca Thomas is vice president for Client Risk Management Consulting at Artex in Bermuda. She has been working in compliance and accounting since 2007.
About Artex
Artex, Gallagher's wholly-owned subsidiary for alternative risk and capital, including fund administration, is a trusted leader and provider of diverse alternative risk and capital solutions.
The Artex Capital Solutions team provides market leading expertise at all stages in the process, from pre-incorporation concept development and structure design to regulatory application, incorporation and through to ongoing management and risk consulting. Our market-wide experience, insights and eye for the path forward, enable us to respond promptly to market cycles and industry-changing events.
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