(CNS): New guidelines for the insurance industry have come into effect, the Cayman Islands Monetary Authority (CIMA) said yesterday. The authority said that Risk Management for Insurers and the Rule on Market Conduct for Class A Insurers, Agents and Brokers came into effect on 2 March to formalise industry best practice in accordance with international standards. Given the recent global financial turmoil, the Rule on Risk Management for Insurers is a timely formalisation of “practices which were being carried out before by most insurers,” said CIMA’s Managing Director Cindy Scotland.
The Risk Management Rule requires insurers regulated by CIMA, both domestic and international, to implement a comprehensive framework for the management of their risks.“Ultimately, it is to ensure that insurers can identify, measure, assess, report and control all sources of risks that could have a material impact on their safety and soundness,” added Scotland.
The Rule on Market Conduct for Class A Insurers, Agents and Brokers transforms an industry practice into a regulatory requirement by imposing various obligations to enhance consumer protection and market confidence. It aims to secure consistency in certain practices in the domestic insurance market, and bolster transparency and disclosure in selling to the benefit of consumers and the market as a whole.
It specifically deals with the areas of market conduct, internal controls, insurance policy wording, disclosure and assessing customer needs, and enforcement. Among other stipulations, it requires that agents and brokers have internal controls and/or protection to safeguard customer assets and that they only 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 or at the time of concluding the contract, a customer must be given written information about: contact details for the insurer; the product (including price and any additional charges); estimated returns; the procedure for making complaints; and the claims procedure.
“This will make it easier for consumers to understand the insurance products which they buy and insurance companies will better assess the needs of consumers, Scotland explained..
CIMA said the measures are in keeping with the Insurance Core Principles, a set of global best practices issued by the International Association of Insurance Supervisors (IAIS) and which are the foundation of effective insurance supervision. The Statement of Guidance on Market Conduct for Class A Insurers, Agents and Brokers amends the SoG issued in 2006. It now complements the new rule and its scope has been extended to brokers.
