The Securities and Exchange Commission of Pakistan (SECP) has issued Code of Corporate Governance for insurance companies under which insurers would ensure effective representation of independent non-executive directors on its Board of Directors. In this regard, the SECP has issued draft of the Code of Corporate Governance for Insurers, 2015 under SRO 1096(I)/2015 here on Thursday.
The proposed rules said provisions/conditions laid down shall be in addition to the provisions/conditions imposed by the Code of Corporate Governance 2012 (for listed insurance companies) or the provisions of the Public Sector Companies (Corporate Governance) Rules, 2013 (for public sector insurance companies). However, in case any conflict arises between the provisions of this Code and the provisions of the Code of Corporate Governance, 2012 (applicable on listed companies) or the provisions of the Public Sector Companies (Corporate Governance) Rules, 2013 (applicable on public sector companies), as the case may be, the provisions of such other law ie, Code of Corporate Governance, 2012 (in the case of listed insurance companies) or the provisions of the Public Sector Companies (Corporate Governance) Rules, 2013 (in the case of public sector insurance companies) shall prevail to the extent of such conflict.
An insurer, in so far as applicable, shall ensure effective representation of independent non-executive directors, including those representing minority interests (if applicable), on its Board of Directors so that the Board as a group includes core competencies considered relevant in Ordinance, 1984 shall not be taken to be an "independent director" for the above-said purposes, it said.
The director representing an institutional investor shall be selected by such investor through a resolution of its Board of Directors and the policy with regard to selection of such person for election on the Board of Directors of the investee company shall be disclosed ID the Director's Report of the investor company. Professional indemnity insurance cover in respect of independent directors shall be encouraged and executive directors, ie working or whole time directors, are not more than one third of the elected directors including the Chief Executive, it said.
It said directors of an insurer shall, at the time of filing their explicit consent to act as such, give a declaration in such consent that they are aware of their duties and powers under the relevant law(s) and the insurer's Memorandum and Articles of Association.
The rules said that no insurer shall have as a director, a person who is serving as a director of more than seven listed companies simultaneously. No person shall be elected or nominated as a director of an insurer unless his appointment has been approved by the SECP under the Insurance Companies (Sound and Prudent Management) Regulations, 2012. This requirement cannot be relaxed in exercise of the powers conferred by the Code.
The person filling up the casual vacancy shall not assume the charge until the approval of the Securities and Exchange Commission of Pakistan in terms of the Insurance Companies (Sound and Prudent Management) Regulations, 2012 is obtained. This requirement cannot be relaxed in exercise of the powers conferred by this Code.
As per responsibilities, powers and functions of board of directors, the rules said that the directors of an insurer shall exercise their powers and carry out their fiduciary duties with a sense of objective judgement and independence in the best interests of that insurer. The insurer shall ensure that statement of ethics and business practices is prepared and circulated among the directors and employees of the insurer to establish a standard of conduct for directors and employees, which shall be signed by each director and employee in acknowledgement of his understanding and acceptance of the standard of conduct. The directors of the insurer shall review the Statement of Ethics and Business Practices annually and any changes made thereto shall also be communicated to all directors and employees within a period of not later than ten days from the date at which changes have been approved by the Board. Each director and employee of the insurer shall also sign the reviewed / amended Statement of Ethics and Business Practices. The record of all signed Statement of Ethics and Business Practices, along with evidence of circulation among the directors and employees, shall be kept at the registered office of the insurer.
The Board of Directors adopted a vision/mission statement and overall corporate strategy for the insurer and also formulated significant policies, having regard to the level of materiality, as may be determined by it. The BoD shall clearly define the respective roles and responsibilities of the Chairman and Chief Executive. Provided that this clause shall take effect from the date at which reconstitution of the Board falls due after the issuance of this code, or December 31. 2018, whichever is earlier. The BoDs must establish a system of sound internal control, which is effectively implemented at all levels within the insurer.
The insurer shall institute policies and procedures such as requiring the separation of critical functions {eg risk management, underwriting (subject to the relevant provisions of Insurance Ordinance. 2000), investment, claims handling, internal audit and compliance with statutory rules and regulations, cross checking of documents, dual control of assets and double signatures on certain documents, etc, to ensure checks and balances within the company}. The Company Secretary shall be the secretary to the Board of Directors, who shall facilitate the Board in convening its meetings and fairly and accurately recording the minutes of all such meetings.
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