Current through Register Vol. 48, No. 12, March 22, 2024
a) The CGAD shall describe the insurer's or
insurance group's corporate governance framework and structure, including
consideration of the following:
1) The Board
and its various committees ultimately responsible for overseeing the insurer or
insurance group and the levels at which that oversight occurs (e.g., ultimate
control level, intermediate holding company, legal entity). The insurer or
insurance group shall describe and discuss the rationale for the current Board
size and structure; and
2) The
duties of the Board and each of its significant committees and how they are
governed (e.g., bylaws, charters, informal mandates), as well as how the
Board's leadership is structured, including a discussion of the roles of the
CEO and Chairman of the Board within the organization.
b) The insurer or insurance group shall
describe the policies and practices of the most senior governing entity and its
significant committees, including a discussion of the following factors:
1) How the qualifications, expertise and
experience of each Board member meet the needs of the insurer or insurance
group;
2) How an appropriate amount
of independence is maintained on the Board and its significant
committees;
3) The number of
meetings held by the Board and its significant committees over the past year,
as well as information on director attendance;
4) How the insurer or insurance group
identifies, nominates and elects members to the Board and its committees. The
discussion should include, for example:
A)
Whether a nomination committee is in place to identify and select individuals
for consideration;
B) Whether term
limits are placed on directors;
C)
How the election and re-election processes function; and
D) Whether a Board diversity policy is in
place and, if so, how it functions; and
5) The processes in place for the Board to
evaluate its performance and the performance of its committees, as well as any
recent measures taken to improve performance (including any Board or committee
training programs that have been put in place).
c) The insurer or insurance group shall
describe the policies and practices for directing senior management, including
a description of the following factors:
1)
Any processes or practices (i.e., suitability standards) used to determine
whether officers and key persons in control functions have the appropriate
background, experience and integrity to fulfill their prospective roles,
including:
A) Identification of the specific
positions for which suitability standards have been developed and a description
of the standards employed; and
B)
Any changes in an officer's or key person's suitability as outlined by the
insurer's or insurance group's standards and procedures to monitor and evaluate
those changes.
2) The
insurer's or insurance group's code of business conduct and ethics, the
discussion of which considers, for example:
A) Compliance with laws, rules, and
regulations; and
B) Proactive
reporting of any illegal or unethical behavior.
3) The insurer's or insurance group's
processes for performance evaluation, compensation and corrective action to
ensure effective senior management throughout the organization, including a
description of the general objectives of significant compensation programs and
what the programs are designed to reward. The description shall include
sufficient detail to allow the Director to understand how the organization
ensures that compensation programs do not encourage and/or reward excessive
risk taking. Elements to be discussed may include, but are not limited to:
A) The Board's role in overseeing management
compensation programs and practices;
B) The various elements of compensation
awarded in the insurer's or insurance group's compensation programs and how the
insurer or insurance group determines and calculates the amount of each element
of compensation paid;
C) How
compensation programs are related to both company and individual performance
over time;
D) Whether compensation
programs include risk adjustments and how those adjustments are incorporated
into the programs for employees at different levels;
E) Any clawback provisions built into the
programs to recover awards or payments if the performance measures upon which
they are based are restated or otherwise adjusted; and
F) Any other factors relevant in
understanding how the insurer or insurance group monitors its compensation
policies to determine whether its risk management objectives are met by
incentivizing its employees.
4) The insurer's or insurance group's plans
for CEO and senior management succession.
d) The insurer or insurance group shall
describe the processes by which the Board, its committees and senior management
ensure an appropriate amount of oversight to the critical risk areas impacting
the insurer's business activities, including a discussion of:
1) How oversight and management
responsibilities are delegated among the Board, its committees and senior
management;
2) How the Board is
kept informed of the insurer's strategic plans, the associated risks, and steps
that senior management is taking to monitor and manage those risks;
3) How reporting responsibilities are
organized for each critical risk area.
The description should allow the Director to understand the
frequency at which information on each critical risk area is reported to, and
reviewed by, senior management and the Board. This description may include, but
is not limited to, the following critical risk areas of the insurer:
A) Risk management processes (an ORSA Summary
Report filer may refer to its ORSA Summary Report pursuant to Article VIII1/4
of the Code);
B) Actuarial
function;
C) Investment
decision-making processes;
D)
Reinsurance decision-making processes;
E) Business strategy/finance decision-making
processes;
F) Compliance
function;
G) Financial
reporting/internal auditing; and
H)
Market conduct decision-making processes.