Life Insurance (prudential standards) determination No. 14 of 2007 - Prudential Standard LPS 510 - Governance
Board compositionBoard composition
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Board composition
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The Board of a life company must have a minimum of five directors at all times.
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The Board must have a majority of independent directors at all times. For life companies that are subsidiaries[4] of other APRA-regulated institutions or overseas equivalents,[5] exceptions may apply as set out at paragraphs 24 to 26. For life companies that are subsidiaries of a parent company that is not prudentially regulated, exceptions may apply as set out at paragraph 27.
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The chairperson of the Board must be an independent director of the life company.
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A majority of directors present and eligible to vote at all Board meetings must be non-executives.
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The chairperson of the Board cannot have been the Chief Executive Officer (CEO) of the life company at any time during the previous three years. If the position of the CEO is unexpectedly vacated, the chairperson may serve as an interim CEO. After a period of 90 days, approval must be sought from APRA to allow this arrangement to continue.
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The chairperson must be available to meet with APRA on request.
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For locally-owned and incorporated life companies, a majority of directors must be ordinarily resident in Australia.
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For foreign-owned locally incorporated life companies at least two of the directors of the life company must be ordinarily resident in Australia, at least one of whom must also be independent.
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Board representation must be consistent with a life company’s shareholding. Where a shareholding constitutes not more than 15% of a life company’s voting shares there should not be more than one Board member who is an associate of the shareholder where the Board has up to six directors, and not more than two Board members who are associates of the shareholder where the Board has seven or more directors. A director is taken to be an associate of a shareholder for the purposes of this clause, if the director is an “associate” of the shareholder, or the shareholder is an “associate” of the director, according to the definition of “associate” in clause 4 of Schedule 1 of the Financial Sector (Shareholdings) Act 1998. That definition is to be applied for the purposes of this clause as if subparagraph (1)(l) of that definition were omitted.
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Where an individual shareholding is greater than 15%, as approved under the Financial Sector (Shareholdings) Act 1998, the Board representation of that shareholding can be greater than allowed in paragraph 22, although it must still be broadly proportionate to the shareholding concerned.