P92 - Insurance Business And Finance - Chapter 4

Front 1

Corporate Governance

Back 1

A system by which organisations are directed and controlled

Front 2

Two main elements of Corporate Governance

Back 2

1. Transparency.

2. Accountability.

Front 3

Corporate Governance - worldwide commonly adopted principles

Back 3

1, Companies should respect shareholder rights.

2. Recognise obligations to stakeholders.

3. Ethical and responsible conduct from directors and managers.

4. Roles and responsibilities of board and management are accountable to shareholders.

5. Board to review and challenge management performance.

Front 4

Corporate Governance - UK administration

Back 4

1. The Companies Act.

2. Listing Rules (administered by FCA).

3. UK Corporate Governance Code (responsibility of FRC)

Front 5

The UK Corporate Governance Code - Topics

Back 5

1. Leadership.

2. Effectiveness.

3. Accountability.

4. Remuneration.

5. Relations with shareholders.

COMPLY OR EXPLAIN

Front 6

Leadership

Back 6

1. Effective and responsible board.

2. Clear division of board and executive responsibilities.

3. Chairman leads the board.

Front 7

Effectiveness

Back 7

1. Balance of skills, knowledge, experience and independence.

2. Formal, rigorous and transparent procedure for appointment of new directors.

3. Board to be supplied with timely and appropriate information.

Front 8

Accountability

Back 8

1. Board to present balanced and understandable assessment.

2. Board to decide on risk appetite and ensure sound risk management.

Front 9

Remuneration

Back 9

1. Sufficient to attract and retain senior personnel.

2. Structured to reward corporate and individual performance.

Front 10

Relations with shareholders

Back 10

1. Board responsible for ensuring dialogue.

2. AGM to communicate with investors and encourage participation

Front 11

Turnbull Guidance - Considerations

Back 11

1. Nature and extent of the risks.

2. Categories and extent it is willing to bear.

3. Probability.

4. Ability to reduce risk.

5. Cost/benefit analysis of operating controls

Front 12

Turnbull Guidance - review effectiveness of control

Back 12

1. How have risks been managed.

2. Any significant failings in internal control.

3. Are necessary actions being taken to remedy.

4. Is more extensive monitoring needed.

Front 13

Corporate Governance for mutuals

Back 13

Association of Financial Mutuals - Annotated Corporate Governance Code for Mutual Insurers

Front 14

Financial Reporting Council - Guidance on Audit Committees

Back 14

1. Monitor Financial Statements.

2. Review internal controls.

3. Monitor/review internal audit function.

4. Recommendations on appointment and remuneration of external auditor

5. Ensure his independence and objectiveness.

6. Report to board any matters for improvement

Front 15

Financial Reporting Council - Guidance on Board Effectiveness

Back 15

1. Role of Board and directors.

2. Role of secretary.

3. Board Composition.

4. Audit, risk and remuneration.

5. Relations with shareholders

Front 16

Corporate Governance - other countries

Back 16

Australia - ASX Corporate Governance Principles and Recommendations.

Germany - German Corporate Governance Code.

USA - Sarbanes-Oxley Act 2002

Front 17

Sarbanes-Oxley Act 2002

Back 17

1. Applies for companies listed on a USA Stock Exchange.

2. Relevant for a number of UK Companies.

3. Auditor independence.

4. Corporate Responsibility.

5. Enhanced financial disclosure

Front 18

UK Listing Rules

Back 18

1. Semi-annual reporting.

2. Contents of prospectus for company seeking IPO.

3. On-going disclosure of price sensitive info.

4. New share offers.

5. Potential/Actual takeover bids

Front 19

Companies House - Three Statutory Functions

Back 19

1. Incorporate and dissolve limited companies.

2. Examine and store company information.

3. Make this information public

Front 20

Company Registration - required information

Back 20

1. Company Name.

2. Public or private.

3. Limited? by shares of guarantee?

4. Country of Registration.

5. Registered office.

6. Proposed Articles of Association

Front 21

Articles of Association - part of a company's consitution

Back 21

1. Relationship between shareholders and company.

2. Moderate balance of power between shareholders.

3. Regulations for running of internal affairs.

Front 22

Annual Return

Back 22

1. 28 days to submit following end of period date.

2. Registered office address.

3. Principal business activity.

4. Details on directors.

5. Share capital

Front 23

Company Accounts

Back 23

1. Sufficient to disclose financial position at any time with reasonable accuracy.

2. Ensure any accounts required comply with the Companies Act.

3. Useful for stakeholders.

4. Must present a true and fair view in line with IFRS

Front 24

Directors Report

Back 24

Include a balanced and comprehensive view of:

1. Main factors likely to affect future development.

2. Environmental matters.

3. Employees.

4. Social and community issues

Front 25

Directors Remuneration Report

Back 25

1. Company policy on directors remuneration.

2. Summary of performance conditions.

3. ABI published guidelines

Front 26

Chairmans Statement

Back 26

1. Broad statement on company's activities.

2. Not subject to external audit.

Front 27

Submission of annual accounts

Back 27

1. Private Companies - within 9 months.

2. Public Companies - within 6 months.

Front 28

Role of Company Secretary

Back 28

1. Maintaining Statutory Registers.

2. Giving notice of AGM.

3. Special resolutions communicated to Companies House.

4. Prompt filing of statutory forms.

5. Accounts - provide to members prior to meeting.

6. Minutes of directors and general meetings

Front 29

Three Lines of Defence Model

Back 29

First Line - identify and control risks in line with strategy - Operational/Front-line management.

Second Line - risk strategy - risk management department.

Third Line - review/audit risk strategy and operation - internal/external auditors

Front 30

Management Controls

Back 30

Underwriting - individual authority limits, second pair of eyes.

Claims - check of validity, review of insurance cover.

Finance - daily reconciliation of accounts, anti-money laundering measures.

HR - reference checks for new staff, regular training and development.

IT - daily back-ups, anti-virus software