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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. 


7.1.1    

The Board should adopt a rigorous process for setting (including approving), and overseeing the implementation of the insurer’s overall business objectives and risk strategies, taking into account the long term financial safety and soundness of the insurer as a whole, and the legitimate interests of its stakeholders, including fair treatment of customers. These objectives and strategies should be adequately documented and properly communicated to its Senior Management, Key Persons in Control functions and all other relevant staff of the insurer. 


7.1.2    

The Board should take a lead in setting the “tone at the top”, including by setting the fundamental corporate values for the insurer. These values should be reflected in the insurer’s business objectives and strategies, and be supported by professional standards and codes of ethics that set out what the insurer considers to be acceptable and unacceptable conduct. In this regard, the Board should take account of the nature of the insurer’s business and the role it plays in the wider financial system. 


7.1.3    

The Board should ensure that the insurer’s overall business objectives and strategies are reviewed at least annually to ensure that they remain appropriate in light of any changes in internal or external business and operating conditions. The Board should ensure more frequent reviews, for instance when an insurer embarks on a significant new business initiative (e.g. a merger or acquisition, or a material change in the direction with respect to the insurer’s product portfolio, risk or marketing strategies), upon the introduction of a new type or class of risk or product or a decision to market products to a new class or category of clients, or following the occurrence of significant external or internal events which may potentially have a material impact on the insurer (including the financial condition, objectives and strategies of the insurer) or the interests of its stakeholders. 


7.1.4    

The Board should establish clear and objective performance goals and measures, both for the insurer and its Senior Management, to promote the effective implementation of the insurer’s business objectives and risk strategies, taking due account of, among other things, the insurer’s long term interests and viability. Where performance goals and measures are developed by the internal or management board in a two-tier system, the external or supervisory board should review the appropriateness of the goals and measures set. The Board as a whole (i.e. including the external or supervisory board in a two-tier system) should also assess, at suitable intervals, whether those performance goals are achieved against the set performance measures for the Senior Management.


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. 


Supervisory Review


7.10

The supervisor has the power to require the insurer to demonstrate the adequacy and effectiveness of its Corporate governance framework. 

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