Corporate Governance in a Group Context Regional

Transcript:Corporate Governance in a Group Context Regional:
Corporate Governance in a Group Context Regional Seminar on Supervision of Insurance Groups Santiago, Chile, 19-21 November 2013 Gunilla Löfvendahl Senior Financial Sector Specialist 2 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 the policyholders. 3 Why is it important? Exposure to risk Decreases the risk of unexpected losses Create efficiency and value on a micro and macro level Competitive markets Goals and objectives Reputation – legal entity and group Inter-linkages Risk of contagion and damage to others’ reputation Customer claims Confidence in the ability to meet future obligations Compliance Facilitates compliance with detailed and complex requirements Supervisory focus on management and governance aspects promote prevention and early detection of problems 4 Key notions and functions Responsibility Accountability Separation of duties and checks and balances Compliance with rules and corporate discipline Management of risk Independence Knowledge Transparency Boards of directors Senior management Risk management and CRO Internal audit and control Compliance and actuarial functions 5 Building-blocks of sound standards and practices 6 Clear lines of responsibility and accountability Define authorities and key responsibilities for board of directors and senior management – create an accountability hierarchy for the staff Ultimate responsibility stays with the board Different responsibilities often requires different persons (conflicts of interest and accountability) Good practice to have a separation between the Chair of the Board and CEO How does the accountability hierarchy work for insurers being part of a group? What about the responsibilities of the shareholders and the accountability towards them? 7 Available accountability models Several models of the accountability hierarchy are available but there are two main key functions Overall strategy and oversight Execution and management One-tier system with board and senior management Two-tier system with Executive and Oversight Board, where the latter consists of independent members (not employees, owners or other stakeholders) Committees of the board with different responsibilities (audit, remuneration, compliance, investment, risk management, etc) Elaborate systems of control can make decision-making more complicated, time consuming and expensive Could also provide a pseudo-comfort about risk – many risks are uncertain and do not fit easily into control frameworks 8 Strategic objectives and corporate values Well articulated corporate strategy that is implemented Should include risk strategy and appetite in line with the long term interests and