The Financial Regulator’s consultation paper on Corporate Governance Requirements for Credit Institutions and Insurance Undertakings remains open for comment until 30 June 2010.
The Consultation Paper is part of a wider strategy to update the domestic regulatory framework applying to credit institutions and (re)insurance undertakings, and has already been the subject of much industry comment.
The Financial Regulator is proposing to:
- Impose requirements on the minimum number of directors on the Board;
- Limit the number of directorships which directors may hold so to ensure they can comply with the expected demands of Board membership;
- Require that Board membership is reviewed at a minimum every 3 years;
- Require clear separation of the roles of Chairman and CEO and preclude an individual who has been CEO, director or senior manager during the previous five years from becoming Chairman;
- Set out clearly the role of the independent non-executive directors;
- Require the Board to set the risk appetite for the institution and to monitor adherence to this on an ongoing basis;
- Set out the minimum requirements for Board committees; and
- Require annual confirmation of compliance to the Financial Regulator.
Although not specifically mentioned, we understand the Financial Regulator has confirmed that the Consultation Paper applies to reinsurers. The Financial Regulator does not intend to apply the full requirements set out in the Consultation Paper to the vast majority of captive insurers. A limited level of corporate governance will apply however and the Financial Regulator has invited feedback from the captive sector in relation to this.
It is proposed that when the requirements are imposed institutions will be given a period of six months to introduce the necessary changes. Where changes to Board membership are necessary the period will be extended to twelve months in order to allow institutions to identify and assess candidates prior to making appointments.