Finance chiefs have introduced several measures to ensure insurers observe best practice and are transparent.
The Cayman Islands Monetary Authority has issued two rules and a statement of guidance to ensure industry practice accords with international standards.
The rules on Risk Management for Insurers and Market Conduct for Class A Insurers, Agents and Brokers – and the accompanying Statement of Guidance – came into effect on March 2, 2009, following Cabinet approval.
The measures conform to the Insurance Core Principles, best practice guidance from the International Association of Insurance Supervisors.
Given the shaky economy, the Rule on Risk Management for Insurers is a timely formalisation of ‘practices which were being carried out before by most insurers’, said the authority’s managing director Cindy Scotland.
It requires that all insurers regulated by the authority, domestic and international, implement a comprehensive framework for management of risks.
‘It is to ensure insurers can identify, measure, assess, report and control all sources of risks that could have a material impact on their safety and soundness,’ said Mrs. Scotland.
The Rule on Market Conduct for Class A Insurers, Agents and Brokers aims to transform industry practice into a regulatory requirement by enhancing consumer protection and market confidence.
It attempts to secure consistency in certain practices in the domestic insurance market and bolster transparency and disclosure in selling to benefit consumers and businesses.
It deals with the areas of market conduct, internal controls, insurance policy wording, disclosure and assessment of customer needs and enforcement.
It requires that agents and brokers have internal controls, can protect customer assets and act within the limits of personal competence and authorisation.
They, as well as insurers, must implement policies and procedures to give effect to the rule’s provisions and must not seek to exclude or restrict any duty or liability to a customer that they have under Cayman law, this rule or any other voluntary code of conduct to which the licensee adheres.
This rule also states that, either before a contract is made or at its conclusion, a customer receives, in writing: contact details for the insurer; details about the product including the price and any charges; estimated returns; and procedures for making complaints and claims.
‘This will make it easier for consumers to understand insurance products they buy and insurance companies will better assess the needs of consumers,’ said Mrs. Scotland.
The Statement of Guidance on Market Conduct for Class A Insurers, Agents and Brokers amends the statement issued in 2006. It now also applies to brokers.