|
|
© 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. |
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.
|
7.9.1 |
Senior Management should implement appropriate systems and controls to ensure that they can effectively carry out the day-to-day management of the business of the insurer in order to achieve the insurer’s business objectives and strategies, and in particular, in accordance with the established levels of Risk tolerance and consistent with internal policies. Such systems and controls should encompass:
- clear and transparent process for engaging persons with appropriate competencies and integrity to discharge the functions of the Senior Management, which include succession planning, on-going training and procedures for termination;
- clear lines of accountability and channels of communication between persons in Senior management and Key Persons in Control Functions;
- proper procedures for the delegation of Senior management functions and monitoring whether delegated functions are carried out effectively and properly, in accordance with the same principles that apply to delegations by the Board (see Guidance 7.3.11);
- standards of conduct and codes of ethics for the Senior management and other staff to promote a culture of sound Risk management and compliance, which include procedures for dealing with conflicts of interests, and the effective implementation on an on-going basis of such standards and codes (see ICP 8 Risk management and Internal controls for conflicts of interest provisions);
- proper channels of communications, including clear lines of reporting, as between the individuals performing the functions of the Senior management and the Board, including provisions dealing with whistleblower protection, and their effective implementation; and
- effective communication strategies with supervisors and stakeholders that include the identification of matters that should be disclosed, and to whom such disclosure should be made.
|
7.9.2 |
Senior Management should also ensure that there are adequate procedures for assessing the effectiveness of their performance against the performance objectives set by the Board. For this purpose, annual assessments of their performance against set goals should be carried out at least annually, preferably by an independent party, a control function, or the Board itself. Any identified inadequacies or gaps should be addressed promptly and reported to the Board. |
7.9.3 |
Senior Management should also promote strong internal controls. It should not interfere with the activities that Control functions carry out in the rightful exercise of their responsibilities, including that of providing an independent view of governance, risk, compliance and control related matters. |
Supervisory Review
7.10
|
The supervisor has the power to require the insurer to demonstrate the adequacy and effectiveness of its Corporate governance framework.
|
|
