Bentley Friendly Society trustee Kevin Bean-Walls has called on the Bermuda Monetary Authority (BMA) to withdraw a press release that stated friendly societies which sell insurance policies to members do not have to comply with their solvency and liquidity requirements — and that financial services products should not be sold without appropriate regulatory oversight.

Bentley Friendly Society was set up in October of 2012, and with seven trustees and 45 members, provides property, home, automobile and motorcycle insurance.

The BMA press release had stated: “The Authority wishes to advise that the offer of such policies by an entity, which is registered under the Friendly Societies Act of 1868, is not regulated by the Authority. Accordingly, it does not have to comply with solvency or liquidity requirements that apply to domestic insurers under the Insurance Act.”

But Mr Bean-Walls said: “We request that the BMA be required to withdraw their disparaging press release and apologise for attempting to discredit our organisation.

“In these difficult economic times the Government needs everyone pulling in the same direction; our organisation is providing opportunities for its members and policyholders. We believe the attack by the BMA undermines all mutual organisations — not just ours.”

Craig Swan, the managing director of supervision at the BMA, is quoted in the press release saying: “The Authority’s view is that no financial services product should be sold to the community without appropriate regulatory oversight. Accordingly, we will undertake a review of the matter and anticipate advising the Government in the near future on this issue.”

However, Friendly Societies are specifically excluded from the Insurance Act 1978 and its regulatory requirements, said Mr Bean-Walls. Section 57 states: “ ... insurance business carried on by a friendly society registered under the Friendly Societies Act 1868 ... shall be deemed not to be insurance business within the meaning of this Act”.

Mr Bean-Walls stated that Bentley Friendly Society has a licence issued by the Government which allows them “to retain their own insurance risk”.

Friendly Societies Act 1868 section one (b) states ‘Societies may be established and registered, and societies already in existence may be enrolled, having for their objects ... the making good of any loss sustained by the members by fire, lightning, tempest or shipwreck, or by any contingency whereby they sustain any loss or damage of their live or dead stock, boats, goods, or stock-in-trade, or of the tools or implements of their trade or calling; ... ’

And Friendly Societies Act 1868 and Friendly Societies Act 1930 appear to place regulatory responsibility on the Registrar General. Section two of the Friendly Society Act 1868 requires friendly societies’ rules should include “the intents, objects and purposes for which it is intended to be established, and shall direct all the uses and purposes to which the money subscribed shall be applied and in what proportions and under what circumstances any member or other person shall become entitled thereto” — and section four of the Act requires that prior to registration of the friendly society, the rules should be submitted for the approval of the Registrar.

The Friendly Societies Act 1930 strengthens financial reporting requirements, including the requirement that a statement of the investment of funds to the Accountant General must be submitted once a year.

Mr Bean-Walls said: “We meet our minimum solvency margin and liquidity ratio as per the BMA’s formula — admitted assets should exceed 75 percent of admissible liabilities.”

Trustees’ responsibilities are also spelled out. The 1868 act states that members of the friendly society can sue its officers for money that they are owed and also requires that trustees and officers should provide security “for the faithful execution of (their) trust”.

Both Acts were updated in 1989.

Mr Bean-Walls explained: “We saw this as a community/business opportunity.

“Our goal is to grow and build, as well as our membership. Some of our trustees are educated to the Master’s level, and some have worked in insurance, sales, finance, construction, communications and IT.”

He added that every member of the friendly society owns a share in the organisation, and as well as providing insurance, there is the potential for members to receive dividends.

“Our goal is to participate in Bermuda at the highest level and provide services to Bermudians to sustain ourselves and to grow in this economic environment.

“It mirrors what the sitting Government would like to do to get Bermuda back on its feet,” he said, and quoted from Finance Minister Bob Richards’ Budget statement: “The status quo is the enemy,” and: “The economy’s growth will come from innovative people who see the need for a product or service and are free to seize the opportunity to make it happen.”

“We’re just Bermudians trying to do things,” he said.

“We believe the BMA is using its far greater resources than we have to undermine us and the Government’s advocacy for mutualisation. Section 57 of The Insurance Act 1978 exempts friendly societies from regulation by the BMA.”

He added: “As a group which retains its own risk, an estimate of what our losses will be, is made, funds are set aside to meet those estimates. If our losses are greater than or less than those estimates, adjustments are made accordingly. This policy is consistent with insurance operations in Bermuda.”

The BMA and the Registry General had not responded to questions by press time.