(i) Boards
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The Board has ultimate responsibility for the safety and soundness of an insurer. Accordingly, the Board should have responsibility for approving and reviewing business strategies and significant policies of the insurer. The Board must use its best endeavours to identify and understand the major risks faced by the insurer. The Board must ensure that an appropriate, adequate and effective system of risk management and internal control is established and maintained, and must use its best endeavours to ensure that senior management monitors the effectiveness of the risk management and control system.
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Given the Board’s responsibilities, it is essential that a shareholder (or a group of associated shareholders) of an insurer is not in a position to exercise undue or disproportionate control or influence over that insurer’s Board, policies or operations.
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As a guide, holdings under 15 per cent of an insurer’s voting shares should have representation of no more than one on a Board of six or less and no more than two on a Board of seven or more. Where shareholdings over 15 per cent have been approved under the Financial Sector (Shareholdings) Act 1998, the shareholder’s Board representation can be higher, but should remain broadly proportionate to the shareholding concerned.
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In addition, at all times, the Board of a locally-incorporated insurer must have:
(a) a minimum of five directors;
(b) a non-executive Chair; and
(c) a majority of non-executive directors.
At least two directors of the insurer must be Australian residents, one of whom must be a non-executive. Further detail, including guidance for foreign-owned locally-incorporated insurers, is set out in Guidance Note GGN 220.1.
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Insurers must provide APRA with details of all newly appointed directors, including their name, principal business associations and curriculum vitae, within 14 days of their appointment. In addition, insurers must provide APRA with an updated annual statement listing all of its directors (including details of any changes to business associations) no later than at the time which the insurer lodges its yearly statutory accounts.
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The Board of a locally incorporated insurer must establish appropriate Board Committees, including at a minimum a Board Audit Committee. The Board Audit Committee must be made up of a majority of non-executive directors and its function shall be to monitor compliance with the Board’s policies, as well as prudential and statutory requirements. The Chair of the Board must not also be the Chair of the Audit Committee. Where the insurer is part of a larger corporate group, APRA may allow the insurer to use the Group Audit Committee as a Board Audit Committee where it is demonstrated that the Group Audit Committee can effectively address the needs of the insurer (provided the Group Audit Committee has a majority of directors who are non-executives of the insurer). Further detail in respect of Board Audit Committees is set out in Guidance Note GGN 220.1.
(ii) Senior Management
- Senior managers comprise persons employed by an insurer who exercise senior management responsibilities. Senior management responsibilities[44] means having primary responsibility for one or more of the following:
(a) high level decision making;
(b) implementing strategies and policies approved by the Board;
(c) developing processes that identify, manage and monitor risks incurred by the insurer; and
(d) monitoring the appropriateness, adequacy and effectiveness of the risk management system.
- Insurers must provide APRA with a list of senior management positions and the responsibilities of those positions. Details of the individuals who occupy these positions, including their name and curriculum vitae, must also be submitted within 14 days of their appointment. In addition, insurers must provide APRA with an updated annual statement listing all senior management positions, and names of persons occupying those positions, no later than at the time which the insurer lodges its yearly statutory accounts.
(iii) Senior Officer from Outside Australia (Foreign Insurers)
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As in the case of locally incorporated insurers, the ultimate responsibility for the safety and soundness of a foreign insurer resides with its Board. However, for practical purposes, APRA will allow a foreign insurers’ Risk Management Strategy (refer paragraphs 40-44) and Reinsurance Management Strategy (see GPS 230 Reinsurance Arrangements) and the Board Declaration (refer paragraphs 54-55) to be approved by a senior officer outside Australia with delegated authority from the Board. The senior officer must have responsibility for overseeing the Australian branch operation.
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At the time of nominating a senior officer from outside Australia, foreign insurers must provide APRA with details of that person, including their name and curriculum vitae. These details must be resubmitted to APRA within 14 days when there is any change in the senior officer from outside Australia. The foreign insurer must ensure that the designated senior officer meets the standards of fitness and proprietary set out in this Standard.