Bermuda insurers and brokers initiated a contract certainty code of practice in time for July 1 renewals, the head of a Bermuda reinsurance organization announced last week.

The code is a voluntary effort to demonstrate commitment to excellent customer service, Brad Kading, president of the Association of Bermuda Insurers and Reinsurers, told National Underwriter in an e-mail.

He said it also should help to protect against claims disputes, such as the much publicized legal battle over coverage of the World Trade Center after the terrorist attacks of Sept. 11, 2001.

“We've just entered into a testing phase” with the code, Mr. Kading noted. “The belief is that Bermuda carriers perform very well on contract certainty, and this next six months affords us an opportunity to measure that performance.”

At renewal time, as companies and brokers move ahead with the code, customers should see an increased focus “on the key questions that need to be answered, with specific deadlines given for getting answers to those critical questions, explained Mr. Kading.

“Anything outstanding should be identified and addressed in a timely manner,” he said, adding that companies will monitor performance, put internal controls in place, and then be prepared to commit to improved performance on Jan. 1, 2009–the final implementation date.

Implemented by ABIR, the code originally was suggested by several ABIR members and the Bermuda Insurance and Reinsurance Brokers Association, he said. ABIR, Mr. Kading noted, represents 22 Class-4 insurers and reinsurers–the global insurers and reinsurers operating out of Bermuda.

During calendar-year 2007, Mr. Kading said ABIR members wrote $59 billion in global gross written premium on a capital and surplus base of $73 billion.

He added that ABIR members provide 40 percent of the U.S. property-catastrophe reinsurance market; 25 percent of general U.S. reinsurance; 25 percent of medical malpractice insurance; and are major players in U.S. crop insurance and reinsurance, providing 33 percent of the crop insurance coverage for Iowa.

The contract certainty code has been hailed by the Bermuda Monetary Authority as a positive development supporting the island's position in the reinsurance industry.

“From the regulatory perspective, this initiative should further reduce operational and financial risk within the market, which ultimately is in the best interests of clients using reinsurance services offered by Bermuda,” Matthew Elderfield, chief executive officer of the BMA, said in a statement.

The BMA defined contract certainty as the “full and final agreement of all terms and conditions between the (re)insurer and (re)insured at the time of binding. This will be evidenced by a binder, cover note or similar [document] which reflects all terms and conditions and which is agreed to by the (re)insurer. The final committed capacity must be clearly identified.”

The BMA said it looks forward to the analysis of market participation that will follow the testing period, which will serve to demonstrate the scale of support for, and adherence to, the code. (See sidebar for the principles involved under the new code.)

Special Reports /

Bermuda Contract Certainty Code Launches Testing Phase On July 1

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