Get a plain-English read of Prudential Standard LPS 510

Turn the raw legal text into a practical explanation grounded in Life Insurance (prudential standard) determination No. 2 of 2006 - Prudential Standard LPS 510 - Governance.

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Prudential Standard LPS 510

Governance

Objectives and key requirements of this Prudential StandardThe ultimate responsibility for the sound and prudent management of life companies rests with their Board of directors. It is essential that life companies have a sound governance framework and conduct their affairs with a high degree of integrity.A culture that promotes good governance is of benefit to all stakeholders of a life company and helps to maintain public confidence in the institution.This Prudential Standard sets out minimum foundations for good governance of life companies. It aims to ensure that life companies are managed in a sound and prudent manner by a competent Board of directors, which is capable of making reasonable and impartial business judgements in the best interests of the life company and which gives due consideration to the impact of its decisions on policyholders.The governance arrangements of life companies build on these foundations in ways that take account of the size, complexity and risk profile of the institution.The key requirements of this Prudential Standard include:specific requirements with respect to Board size and composition;the chairperson of the Board must be an independent director;an Audit Committee must be established;life companies must have a dedicated internal audit function;certain provisions dealing with independence requirements for auditors consistent with those in the Corporations Act 2001; andthe Board must have a policy on Board renewal and procedures for assessing Board performance.A number of requirements also apply to eligible foreign life insurance companies.