|
|
© IAIS. All rights reserved.
|
ICP on-line tool
ICP 7 Corporate Governance
The supervisor requires insurers to establish and implement a corporate governance framework which provides for sound and prudent management and oversight of the insurer’s business and adequately recognises and protects the interests of policyholders.
Objectives and Strategies of the Insurer
7.1
|
The supervisor requires the insurer’s Board to set and oversee the implementation of the insurer’s business objectives and strategies for achieving those objectives, including its risk strategy and risk appetite, in line with the insurer’s long term interests and viability.
|
Appropriate Allocation of Oversight and Management Responsibilities
7.2
|
The supervisor requires the insurer’s Board to:
- ensure that the roles and responsibilities allocated to the Board, Senior management and Key Persons in Control functions are clearly defined so as to promote an appropriate separation of the oversight function from the management responsibilities; and
- provide adequate oversight of the Senior Management.
|
Structure and Governance of the Board
7.3
|
The supervisor requires the insurer’s Board to have, on an on-going basis:
- an appropriate number and mix of individuals to ensure that there is an overall adequate level of knowledge, skills and expertise at the Board level commensurate with the governance structure and the nature, scale and complexity of the insurer’s business;
- appropriate internal governance practices and procedures to support the work of the Board in a manner that promotes the efficient, objective and independent judgment and decision making by the Board; and
- adequate powers and resources to be able to discharge its duties fully and effectively.
|
Duties of Individual Board Members
7.4
|
The supervisor requires the individual members of the Board to:
- act in good faith, honestly and reasonably;
- exercise due care and diligence;
- act in the best interests of the insurer and policyholders, putting those interests of the insurer and policyholders ahead of his/her own interests;
- exercise independent judgment and objectivity in his/her decision making, taking due account of the interests of the insurer and policyholders; and
- not use his/her position to gain undue personal advantage or cause any detriment to the insurer.
|
Risk Management and Internal Control Systems and Functions
7.5
|
The supervisor requires the insurer’s Board to provide oversight in respect of the design and implementation of sound Risk management and internal control systems and functions. |
Remuneration Policy and Practices
7.6
|
The supervisor requires the insurer’s Board to:
- adopt and oversee the effective implementation of a remuneration policy, which does not induce excessive or inappropriate risk taking, is in line with the identified Risk appetite and long term interests of the insurer, and has proper regard to the interests of its stakeholders; and
- ensure that such a remuneration policy, at a minimum, covers those individuals who are members of the Board, Senior Management, Key Persons in Control functions and other employees whose actions may have a material impact on the risk exposure of the insurer (major risk–taking staff).
|
Reliable and Transparent Financial Reporting
7.7
|
The supervisor requires the insurer’s Board to ensure there is a reliable financial reporting process for both public and supervisory purposes which is supported by clearly defined roles and responsibilities of the Board, Senior management and the external auditor.
|
Transparency and Communications
7.8
|
The supervisor requires the insurer’s Board to have systems and controls to ensure the promotion of appropriate, timely and effective communications with the supervisor and relevant stakeholders on the governance of the insurer. |
7.8.1 |
Communications with the supervisor and other stakeholders should promote effective engagement of the supervisor and stakeholders on the governance of the insurer to enable informed judgments about the effectiveness of the Board and Senior management in governing the insurer. |
7.8.2 |
Subject to any reasonable commercial sensitivities and applicable privacy or confidentiality obligations, the insurer’s communication policies and strategies should include providing to the insurer’s stakeholders information such as the following:
- the insurer’s overall strategic objectives, covering existing or prospective lines of business and how they are being or will be achieved;
- the insurer’s governance structures, such as allocation of oversight and management responsibilities between the Board and the Senior Management, and organisational structures, including reporting lines;
- members of the Board and any Board committees, including their respective expertise, qualifications, track-record, other positions held by such members, and whether such members are regarded as independent;
- processes in place for the Board to evaluate its own performance and any measures taken to improve the Board’s performance;
- the general design, implementation and operation of the remuneration policy;
- major ownership and group structures, and any significant affiliations and alliances; and
- material related-party transactions.
|
7.8.3 |
The supervisor may require more detailed and additional information relating to the insurer’s Corporate governance for supervisory purposes, which may include commercially sensitive information, such as assessments by the Board of the effectiveness of the insurer’s governance system, internal audit reports and more detailed information on the remuneration structures adopted by the insurer for the Board, Senior Management, Key Persons in Control functions and major risk-taking staff. The insurer’s communication policies and strategies should enable such information to be provided to the supervisor in a timely and efficient manner. Supervisors should safeguard such information having due regard to the confidentiality of commercially sensitive information and applicable laws. |
7.8.4 |
Disclosures of information on remuneration should be sufficient to enable stakeholders to evaluate how the remuneration system relates to risk and whether it is operating as intended. Relevant information may include:
- the operation of risk adjustments, including examples of how the policy results in adjustments to remuneration for employees at different levels;
- how remuneration is related to performance (both financial and personal business conduct) over time; and
- valuation principles in respect of remuneration instruments.
|
7.8.5 |
Appropriate quantitative information should also be made available to enable supervisors and stakeholders to evaluate the financial impact of the remuneration policy. Such information may include:
- the total cost of remuneration awarded in the period, analysed according to the main components such as basic salary, variable bonus and long-term awards;
- the total amount set aside in respect of deferred remuneration;
- adjustment to net income for the period in respect of remuneration awarded in previous periods;
- the total costs of all sign-on payments in the period and number of individuals to whom these relate; and
- the total costs of all severance payments in the period and number of individuals to whom these relate.
These amounts should be analysed by type of instrument (e.g. cash, shares, share options etc.) as applicable, and in a manner consistent with the key elements of the remuneration policy. |
7.8.6 |
Disclosure of information on governance should be made on a regular (for instance, at least annually) and timely basis. |
Duties of the Senior Management
7.9
|
The supervisor requires the insurer’s Board to have appropriate policies and procedures to ensure that Senior Management:
- carries out the day-to-day operations of the insurer effectively and in accordance with the insurer’s strategies, policies and procedures;
- promotes a culture of sound risk management, compliance and fair treatment of customers;
- provides the Board adequate and timely information to enable the Board to carry out its duties and functions including the monitoring and review of the performance and risk exposures of the insurer, and the performance of Senior Management; and
- provides to the relevant stakeholders and the supervisor the information required to satisfy the legal and other obligations applicable to the insurer or Senior Management.
|
Supervisory Review
7.10
|
The supervisor has the power to require the insurer to demonstrate the adequacy and effectiveness of its Corporate governance framework.
|
|
