Corporate Governance International Fellows Presentation April 15 2010

Corporate Governance International Fellows Presentation April 15, 2010

Corporate Governance • What is Corporate Governance? • How is CG currently required of U. S. insurers? • How is CG currently reviewed by U. S. regulators? • What changes are coming?

What is Corporate Governance? A framework of rules and practices by which a board of directors ensures accountability, fairness and transparency in an insurer’s relationship with all its stakeholders.

What is Corporate Governance? • Suitability – Owners • Financial stability – Directors • Background and Experience – Senior Management • Background and Experience

What is Corporate Governance? • Board of Directors – Duties • Care • Loyalty • Oversight – Structure • Independence • Committees

What is Corporate Governance? • Senior Management – Duties • • Financial Reporting Risk Management Internal Controls Integrity/Code of Conduct

How is CG currently required of U. S. insurers? • General Corporate Law – Generally at the State Level • Board structure • Duties • Case Law – Generally at the State Level • Court rulings

How is CG currently required of U. S. insurers? • Requirements issued by the Securities and Exchange Commission (SEC) for publiclyheld companies – Sarbanes-Oxley Act of 2002 • Audit Committee independence • Attestation regarding internal control over financial reporting – Other requirements • Remuneration • Risk Management

How is CG currently required of U. S. insurers? • Annual Financial Reporting Model Regulation (NAIC #205) – Audit Committee Independence – Internal Control over Financial Reporting • Other Model Laws – Holding Company Models (#440 & #450) – Hazardous Financial Condition Model (#385) • Required Reporting and Disclosures – Annual Statement and Supplemental Filings – Audit Report and Actuarial Report

How is CG currently reviewed by U. S. regulators? • Financial Analysis and Reporting – Code of Conduct – Management’s Report of Internal Controls – Supplemental Compensation Exhibit – Information on Risk Management • Form B filing • Actuarial report • MD&A

How is CG currently reviewed by U. S. regulators? • Financial Examination – Exhibit M of Financial Condition Examiners Handbook • Onsite review of corporate governance and risk management. • Interviews of Directors and Senior Management • Overall CG Assessment

What changes are coming? • Recent financial crisis – Fallout – Lessons learned • IAIS redraft of principles relating to CG – ICP 5: Suitability – ICP 7: Corporate Governance – ICP 8: Risk Management & Internal Control

What changes are coming? • Corporate Governance (EX) Working Group – Part of a broader Solvency Modernization Initiative – Considering changes to improve CG practices and regulator assessment • More explicit standards • Additional authority

What changes are coming? • Corporate Governance (EX) Working Group – Study of existing law relating to corporate governance – Study of international standards • • Australia Canada Switzerland UK

What changes are coming? • White Paper on High-Level CG Principles – Proportionality Concept – 20 Principles Included – Topics: Overall CG, Board of Directors, Senior Management, Suitability of Individuals, Reporting and Transparency, Risk Management and Internal Control Systems, and Regulatory Oversight

What changes are coming? • White Paper released for public comment through May 13, 2011 • June meeting being scheduled to address comments • Also need to determine how principles will be implemented/enforced – Legislation – Link to existing authority

Questions

Contact Information Bruce Jenson Financial Examination Manager bjenson@naic. org 816 -783 -8348