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.


Appropriate allocation of oversight and management responsibilities


7.1
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 oversight of the Senior Management.


Corporate culture, business objectives and strategies of the insurer


7.2

The supervisor requires the insurer’s Board to set and oversee the implementation of the insurer’s corporate culture, business objectives and strategies for achieving those objectives, in line with the insurer’s long term interests and viability.


Structure and governance of the Board


7.3
The supervisor requires the insurer’s Board to have, on an ongoing basis:
  • an appropriate number and mix of individuals to ensure that there is an overall adequate level of competence at the Board level commensurate with the governance structure;
  • 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 that an individual member of the Board:
  • 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 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.


Duties related to risk management and internal controls


7.5

The supervisor requires the insurer’s Board to provide oversight in respect of the design and implementation of risk management and internal controls.


Duties related to remuneration


7.6
The supervisor requires the insurer’s Board to:
  • adopt and oversee the effective implementation of a written remuneration policy for the insurer, which does not induce excessive or inappropriate risk taking, is in line with the corporate culture, objectives, strategies, identified risk appetite, and long term interests of the insurer, and has proper regard to the interests of its policyholders and other stakeholders; and
  • ensure that such a remuneration policy, at least, 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 that is supported by clearly defined roles and responsibilities of the Board, Senior Management and the external auditor.


External Audit


7.8

The supervisor requires the insurer's Board to ensure that there is adequate governance and oversight of the external audit process.


Communications


7.9

The supervisor requires the insurer’s Board to have systems and controls to ensure appropriate, timely and effective communications with the supervisor on the governance of the insurer.


Duties of Senior Management


7.10
The supervisor requires the insurer to ensure that Senior Management:
  • carries out the day-to-day operations of the insurer effectively and in accordance with the insurer’s corporate culture, business objectives and strategies for achieving those objectives in line with the Insurer's long term interests and viability;
  • promotes 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
  • maintains adequate and orderly records of the internal organisation.


Supervisory review


7.11

The supervisor requires the insurer to demonstrate the adequacy and effectiveness of its corporate governance framework.