The Securities and Exchange Commission of Pakistan (SECP) has directed insurance companies to constitute claim settlement committees to effectively combat fraudulent claims cases of insurance. Sources told Business Recorder on Friday that the SECP has proposed constitution of different committees by the insurance companies for resolving issues under Code of Corporate Governance for Insurers, 2015.
According to the draft rules, Board of Directors of the insurer shall form the specified committees under the said rules. The claim settlement committee shall devise the claims settling policy of the company. It shall oversee the claims position of the insurer and ensure that adequate claims reserves are maintained. The committee shall determine the circumstances under which the claim disputes shall be brought to its attention and decide how to deal with such claim disputes. It shall also oversee the implementation of the measures for combating fraudulent claims cases.
The underwriting committee shall formulate the underwriting policy of the insurer. It shall set out the criteria for assessing various types of insurance risks and determine the premium policy of different insurance covers. It shall regularly review the underwriting and premium policies of the insurer with due regards to relevant factors such as its business portfolio and the market development.
The reinsurance and co-insurance committee shall develop the policy for effecting reinsurance, not inconsistent with the relevant provisions of the Insurance Ordinance and shall ensure that adequate reinsurance arrangements are made for the business of the insurer. It shall peruse the proposed reinsurance arrangements prior to their execution, review the arrangements from time to time and subject to the consent of the participating reinsures, make appropriate adjustments to the arrangements in the light of the market development. It shall also assess the effectiveness of the reinsurance programme for the future reference.
The remuneration committee shall be responsible to propose a remuneration approach and related policies for the insurer covering the remuneration policy, remuneration governance and structure (including approval policy for the level and composition of compensation), and the components of compensation (such as the amount of fixed remuneration, shares or options, other variable remuneration, pension rights, redundancy pay and other forms of compensation and benefits, as well as the performance criteria and their application).
The committee shall also prepare remuneration reports or other required or voluntary disclosures on compensation practices on an annual basis but at least prior to the convening of the annual general meeting for the immediate preceding year. Additionally, the committee shall also review and make recommendations to the BoDs regarding the specific remuneration of the Board members, the CEO, the senior management and key officers and other high earners of the insurer. The remuneration committee shall also oversee the compensation of control functions such as the internal audit. However, at all times, the committee shall ensure that the remuneration approach is consistent with the performance and risk management framework of the insurer.
The nominations committee shall be responsible to implement the Board's policy on Board's renewal so that the Board individually and collectively continues to maintain target skill levels and independence, make recommendations to the Board with regard to the nomination for appointment or reappointment of members of the Board consistent with appropriate criteria established in their profiles and any succession plans and ensure proper orientation of Board members in respect of their responsibilities.
The ethics and compliance committee shall be responsible for monitoring the compliance function and the insurer's risk profile in respect of compliance with the laws applicable to it as well as the internal policies and procedures (including the insurer's code of ethics or conduct). The committee shall also require reports detailing the insurer's risk profile and the compliance activities undertaken proactively aiming at determination of the insurer's ability to meet its legal and ethical obligations as well as reports on identified weaknesses, lapses, breaches or violations and the controls and other measures in place to help detect and address the same.
The committee shall supervise and monitor matters reported using the insurer's whistle blowing or other confidential mechanisms for employees and others to report ethical and compliance concerns or potential breaches, violations or frauds. The risk management committee shall oversee the activities of the risk management function/ department of an insurer, and shall make appropriate recommendations to the Board and shall assist the Board in implementation of the decisions taken by the Board to mitigate probable risks falling within the purview of the risk management function/department.
The insurer shall constitute an investment committee, which shall consist of a minimum of two non-executive directors of the insurer, the CEO, the CFO and wherever an appointed actuary is employed. The decisions taken by the committee shall be recorded and be provided to the Securities and Exchange Commission of Pakistan within 30 days from the date at which the decisions are taken by the committee.
The rules said that the Board of Directors of the insurer shall establish an Audit Committee which shall comprise not less than three members, including the chairman. Majority of the members of the committee shall be from amongst the non-executive directors of the insurer and the chairman of the Audit Committee shall preferably be a non-executive director. The names of members of the Audit Committee shall be disclosed in each annual report of the insurer.