3.7 Registrar of Companies
3.7.1 Factual assessment
Regulation of insurance business is conducted by
the Registrar of Companies. The Registrar is directly accountable
to the Minister of Finance.
3.7.1.1 Staffing
The Registrar of Companies has advised us that its
current staff complement is 37. Among the current staff there
are a number with professional qualifications including Certified
Public Accountants, Master of Business Administration, and individuals
who shall shortly be writing their final exam for a professional
accounting designation.
In addition there are staff with broad insurance,
auditing, banking, compliance and supervisory experience. Technical
Officers require a minimum of a Bachelor's degree and two years
experience in a business-related discipline. All senior managers
are required to have advanced degrees and/or professional designations
and a minimum of between five and ten years management experience.
3.7.1.2 Training
The department maintains membership in and attends
as many of the quarterly meetings as possible of the NAIC, the
IAIS and other regulatory bodies in order to keep current with
emerging issues. In addition, the department participates in seminars
and training provided by the Bermuda Insurance Institute on a
regular basis. Further, members of the department attend insurance
conferences such as RIMS, the World Captive Forum and ASHRMS and
other similar conferences where current topics are discussed.
The Registry has utilised programmes such as the
CPA, CPCU, ACII to facilitate, additional training. The Registry
has also looked for training opportunities within the private
sector, such as in-house technical training seminars and workshops
relating to accounting and insurance.
3.7.2 Issues and recommendations
3.7.2.1 Reliance on the work of third parties
In exercising his supervisory powers the Registrar
of Companies places reliance on:
- the BMA for vetting shareholders of proposed
companies;
- the Insurers Admissions Committee who, together
with the Registrar, review and make a recommendation regarding
the approval of applications for the incorporation and licensing
of insurance entities; and
- the auditors, who conduct an annual independent
statutory audit of all insurers.
This indicates that regulation is reliant on the
work of third parties particularly in the context of on-site supervision.
Whilst IAIS principles and standards do not preclude
the use of external agents from carrying out on-site elements
of supervision, we consider that where such an approach to supervision
is adopted, certain verification and guidance procedures must
be introduced by the regulator.
Auditors in Bermuda currently provide a statutory
audit opinion in accordance with the Insurance Act, an opinion
on an insurer's solvency certificate and on the necessary declaration
of statutory ratios. The non-statutory opinions are given in accordance
with the Insurance Returns and Solvency Regulations 1980.
The Registrar accepts that an auditor's report does
not in itself replace the need for an on-site inspection, however
the view is taken by the Regulator that the processes undertaken
to produce such a report do fulfil this function.
It is also the view of the Registrar that the outsourcing
of annual inspections to independent agents rather than conducting
this work in-house improves the efficiency and effectiveness of
the process in a market such as Bermuda, where the predominant
proportion of the industry is captive business and the public
is not in any way exposed to potential harm. Whilst we do see
merit in the efficiency argument, in our view such delegation
can only be effective if certain criteria are met:
- there should be specific guidance notes in issue
which include the prescribed format of regulatory reports;
- active dialogue between the regulator and independent
agents must occur throughout the process including the definition
of scope and initial direction and the discussion of the agent's
findings; and
- the regulator must conduct checks of its own
to ensure that the agents are fulfilling their responsibilities.
At present, reporting by the auditor is restricted
to financial matters prescribed by the Insurance Act and its related
regulations. To the extent required, we believe this arrangement
satisfies the first two criteria, but not the third.
However, we believe that the scope of on-site inspections
should extend beyond purely financial issues and should encompass
other aspects of insurance business such as investment policy,
underwriting policy and proper record keeping.
Therefore in our opinion:
- there are aspects of on-site supervision which
are not being performed by any of the various parties involved
with insurance regulation; and
- where reliance is currently being placed on third
parties, there is no vetting of their "field work" following
the conduct of the statutory audit.
We recommend that, in order to achieve effective
delegated, full-scope on-site supervision, the Registrar should
issue guidance notes covering non-financial aspects of supervision,
procedures and reporting, participate in a more active dialogue
with its agents through the process and carry out periodic vetting
checks at its insurance licence holders to ensure these agents
are adequately fulfilling their role.
3.7.2.2 Operational independence
The relationship with the Minister of Finance does
not accord with the principle of regulatory independence.
In order to meet good practice as set out in the
Guidance Notes, we believe the insurance element of the companies
registry should be separated into a body with statutory independence
which would take on full responsibility, amongst other things,
for licensing, supervision and enforcement. The powers currently
vesting with the Minister of Finance should be transferred to
this new body.
