28 11月 Prudential Governance
The Bank of England’s Prudential Regulation Authority has issued a consultation in respect of a new regulatory framework for senior insurance managers. The proposals mainly relate to those businesses which operate within the insurance, reinsurance and third country branch undertakings but they contain some interesting ideas which other organisations may wish to consider.
In addition to a fit and proper assessment the consultation also draws in the allocation of responsibilities to senior insurance managers and the application of conduct standards to individuals performing key functions. The standards have been drawn up in response to Solvency II which “recognises that central to good governance is the appropriate and transparent allocation of oversight and management responsibilities within each firm and group.” This, the proposal says, has the triple benefits of enabling proper decision making, eliminating conflicts of interest and ensuring sound management.
In pursuit of these governance aims, the proposal calls for each firm affected to draw up a ‘governance map’, essentially a record of key functions within the firm and the names of those responsible for key functions as well as showing the allocation of significant management responsibilities and reporting lines for those affected. Core responsibilities identified within the proposal include:
- production and integrity of the firm’s financial information and regulatory reporting
- development and maintenance of the firm’s business model
- induction, training and professional development for all the firm’s key function holders
- oversight of the firm’s remuneration policies and practices
- allocation and maintenance of the firm’s capital and liquidity
- performance of the firm’s Own Risk and Solvency Assessment (ORSA);
When it comes to conduct, the proposal calls for key individuals to act with integrity and with due skill, care and diligence as well as being open and co-operative in their dealings with regulators. This not only helps to protect the interests of the businesses themselves it also helps to ensure a measure of protection for those who take advantage of the services on offer. Conflicts of interest should also be eliminated if those involved act with openness and integrity.
Whilst much of the proposals relate specifically to the insurance industry, the basics of sound governance apply no matter what industry or sector a business finds itself in. Acting with integrity, clearly setting out key responsibilities and reviewing these should the business model change are all key elements of a corporate governance policy which will benefit the long term interests of an organisation.