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Corporate governance and risk management in the insurance sector: sound practices and experiences

Corporate governance and risk management in the insurance sector: sound practices and experiences. Seminar on risk-based capital regulation and corporate governance in the insurance sector Santiago, Chile 13 December 2011. Perspectives on governance. Legal perspective :

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Corporate governance and risk management in the insurance sector: sound practices and experiences

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  1. Corporate governance and risk management in the insurance sector: sound practices and experiences Seminar on risk-based capital regulation and corporate governance in the insurance sector Santiago, Chile 13 December 2011

  2. Perspectives on governance • Legal perspective: Corporate governance does not equal internal system of governance • Risk-based perspective: How can governance promote good risk management? • Cross-sectoral perspective: Specificities for financial institutions? • Practical perspective: How proportionate can governance be? • Supervisory perspective: Effective supervision should support good governance

  3. Legal perspective • Board structure: different legal structures due to corporate law • Solvency II: “Administrative, management and supervisory body” • Shareholder value & policyholder protection: an odd couple? • Influence on the level of risk. • Remuneration: link to long-term performance Promote responsibility

  4. Risk-based perspective • Install effective control mechanisms to avoid excessive risk-taking. • Role of “the board”: • Board should play and active role in the risk management: identify, understand and control risks • Own Risk and Solvency Assessment in Solvency II • Key functions: risk management, compliance, actuarial function and audit. Identify, measure, understand and monitor risks

  5. Cross-sectoral perspective • Financial institutions have a high visibility in the corporate governance discussions • European Commission Green Paper • CRDIV, SII • Banks, insurers, financial conglomerates: need to reflect good practices in risk management • With specificities (e.g.actuarial function in insurance) Relevance for financial sector

  6. Practical perspective • How to implement SII governance requirements in a proportionate manner? • “Large” and “small” institutions: risk is the key factor • Level of prescription of the governance requirements • Combination of duties, tasks, functions (except: audit!) • Requirements on outsourcing • Proportionality principle applies in both ways Principle-based, focused on the outcome

  7. Supervisory perspective • Risk-based supervisory review: • Financial stability and policyholder protection • Ensure supervision for all undertakings in a harmonised framework through a consistent risk assessment framework (impact and probability) • Prevent pro-cyclical effect of supervisory intervention • Governance of supervisors: resources and cooperation • Colleges • Transparency and accountability Ensure effective implementation of the risk-based framework

  8. Thank you! Pamela Schuermans Solvency II coordinator, EIOPA

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