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CREATING A STRONGER INSURANCE SECTOR

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Each large company has a relationship manager in the ... Degree of risk ??????? ?????. Seriousness. of. Offense. ???????????. ?????????. Reaction ... – PowerPoint PPT presentation

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Title: CREATING A STRONGER INSURANCE SECTOR


1
??????????? ?????????????
?
????????????? ??????????
CREATING A STRONGER INSURANCE SECTOR ????????
???????? ?????????? ???????
?????? 15
2
Regulation Corporate Governance ???????????
?? ????????????? ??????????
hand in hand ???? ?? ????
3
Unified Regulation ?????? ?????????????
One regulator ?????? ?????????
Banks ?????
Insurance companies ????????? ????????
4
Companies are clients ???????? ????????? ?
???????? ???????? ?????????? ??????????
  • Each large company has a relationship manager in
    the regulators office ? ?????? ???????? ????
    ???????? ?? ?????????????? ?? ?????????
    ???????????

5
Regulators office is split into teams
???????????????? ??????? ?????? ??????????
??????? ???????? ?? ?????? ? ??????
6
Funding is by levies ?????????????? ?? ????
???????
regulator is independent from politics
????????? ?? ??????? ?? ???????????? ?????????????
Insurance Companies pay of premiums
????????? ???????? ?????? ????? ??? ??
????????? ??? ?????? Banks pay of assets
????? ?????? ????? ??? ?? ?? ???????
7
  • Regulator appointed to a fixed term
    ???????????? ?????? ?????????? ???????
    ??????????? ?? ????????????? ????

To assure his independence ??? ??????????????
???????? ????????? ??? ?????????????
8
Regulator reports directly to minister of
finance ?????? ??????? ????????? ? ??????
?????????? ???????? ????????
  • Regulation and supervision is one office
    ??????? ????????????? ????????? ???????????? ?
    ??????? ?? ????????? ???????????? ????????? ?
    ????? ???????????????? ??????

regulator
minister
9
A / Main objectives ??????? ???? B / Balanced by ????????????? ? ???????
Prevent undue loss to policyholders - ????????????? ????????????? ????? ???????????????? Encourage competition in market place - ??????????? ??????????? ?? ?????
Maintain confidence in financial system -???????????? ??????? ? ?????????? ??????? Provide cost effective service - ?????????????? ??????????? (????-????????) ?????
10
Market conduct needs a different regulator
?????? ????? ??????? ?????????? ?????????????
Solvency ????????????-??????
conduct
Market Conduct ???????? ?????????

Conflict Of Interest ???????? ?????????

11
Rely on others to reduce costs ?????????? ??
?????? ?????????? ????? ??? ?????????? ????????
12
???????????? ???????
  • Reduced costs ?????????? ????????
  • Greater analysis ????? ???????????
  • ??????

Computer packages available ????????? ?????????
13
  • in my professional opinion ?? ?????
    ????????????????? ??????
  • According to actuarial principles ?? ?????????
    ?????????
  • Must be interviewed if he leaves ????????
    ?????? ???? ?????????? ??? ??????????

????????
14
??????? ?????
  • Regular meetings with regulator ??????? ?
    ??????????? ??
  • ?????????? ??????
  • Letters of understanding audit principles to
    be followed ???????
  • ? ?????????? ???????? ??????, ??????? ?????
  • ???????????
  • Unsatisfactory work means removal from approved
    list ?????-
  • ??????????????? ?????? ???????? ? ???????? ??
    ??????
  • Auditor must be expert in insurance ???????
    ??????
  • ???? ????????? ? ???????????

15
?????????? ?????
  • Works with external auditor ?????? ? ???????
    ?????????
  • Same professional standards ?? ??
    ????????????????
  • ?????????
  • Keeps detailed working papers ??????? ?
    ???????? ?????????
  • ??????????
  • Reports to board of Directors ????? ?????
    ??????? ??????????

16
  • Board is ultimately responsible for the company
    -
  • ????? ?????????? ???????? ?? ?????? ????????
  • Minutes of meetings will be reviewed by
    regulator ?????????
  • ????????? ?????? ??????????????? ???????????
  • Role will be discussed under corporate
    governance ????
  • ?????? ??????????? ? ?????? ??????????????
  • ??????????

????? ??????????
17
Source of authority ???????? ??????
  • Law - ?????
  • Regulations - ?????????????
  • Guidelines - ???????
  • 100 compliance expected ??????????????
    ????????????? ??????????

18
  • 10 year sunset clause on law ???????? ?
    ??????????? ???????? ?????? (??? ??? ?????????
    ??????), ????? 10 ??? ????????
  • Discussions with industry on changes ?????????
    ?????? ??????????? ?????? ?? ??????????
    ??????????

Regulation can only occur with the consent of the
regulated ????????????? ????? ???? ?????? ?
???????? ?????????????
19
International regulation standards
????????????? ????????? ?????????????
World Bank ????????? ????
IAIS - ????
FSAP ????
Toronto School ????? ? ???????
????????? ?????? ??????????? ???????
20
Responsibility is to policyholders Not government
departments - ??????????????? ????? ??????????????
???, ? ?? ????? ?????????????????? ??????????????
Insurance Regulator ????????? ?????????
????????????
The rest of the Government ?????????
?????????????
21
Verification Auditing ????????-??????? ?????
Risk based Auditing ????? ?????????? ?? ??????
?????
22
Camel Caramels
??????? ? ????????
C capital - ??????? A assets - ?????? R reinsuranc
e - ??????????????? A actuarial reserves -
??????? M management - ?????????? E earnings -
?????? L liquidity - ??????????? S subsidiaries
?????????? ????
23
Capital - ???????
  • Capital relative to regulations ???????
  • ???????????? ?????????????
  • Capital relative to other companies ???????
    ???????????? ?????? ????????
  • Access to capital ?????? ? ????????
  • Source ??? ????????
  • Composition of capital ????????? ????????
  • Trend in capital levels ????????? ?????????
    ???????? ????????
  • Dynamic capital forecasting ????????????
    ???????????????

24
Assets - ??????
  • Composition - ?????????
  • Changes in composition ????????? ? ?????????
  • Ratings of securities- ??????? ?????? ?????
  • Risk of default ???? ???????
  • Prudent man rule ??????? ????????? ????????
  • Skill of underwriters ?????????? ?????????????
  • Use of outside consultants ?????????????
    ??????? ?????????????

25
Reinsurance - ???????????????
  • Strength of reinsurer ???? ???????????
  • Location of reinsurer ????? ????????????
    ???????????
  • Treaty liquidity ??????????? ?? ?????????
    ???????????????
  • Treaty risks ????? ?? ????????? ???????????????
  • Type and terms of treaties ???? ? ???????
    ?????????
  • Unusual reinsurance ????????? ???????????????
  • Trust accounts ????????? ?????

26
Actuarial Reserves ????????? ???????
  • Accuracy of data ???????????? ??????
  • Computer codes ???????????? ????
  • Classification of liabilities ?????????????
    ???????????????
  • Valuation assumptions ???????? ??????????
  • Claims liability ??????????????? ?? ??????????
    ?? ???????
  • Loss development triangles ????????????
    ???????? ???????
  • IBNR experience ???? ?? ????

27
Management - ??????????
  • Succession planning ??????????????????
    ????????????
  • Compensation schemes ???????????? ???????
    ???????????
  • Loyalty to company or owners ???????? ????????
    ??? ??????????
  • Fit and proper test ???? ?? ????????????
  • Board of Directors knowledge ?????? ? ??????
    ?????? ??????????

28
Earnings - ??????
  • Source of earnings by product
  • and territory
  • ???????? ??????? ? ????????? ?? ?????????,
  • ?? ??????????
  • Trend in earnings ???????? ? ?????? ???????
  • Marketing plan ????????????? ????
  • Can the company meet its business plan ????? ??
    ???????? ????????? ???? ??????-????

29
Liquidity - ???????????
  • How much cash ??????? ????? ?????????
  • of assets and reserves ??????? ? ????????
  • Size and nature of non liquid assets ???????? ?
    ??????? ??????????? ???????
  • Projected cash flow ?????????????? ????????
    ??????
  • Can the company withstand a run ????? ??
    ???????? ????????

30
Subsidiaries ???????? ???????????
  • Transfers to subsidiaries ???????? ????????
    ?????????
  • Why ??????
  • How much ????????
  • Did the Board approve ???????? ?? ??????
  • What controls are on this ??? ?????? ?? ?????
  • How do subsidiaries appear on the balance sheet
    ??? ???????? ???????? ???????? ?? ????????

31
Mini case caramels in Russia
????-???? ???????? ? ??????
C capital - ??????? A assets - ?????? R reinsuranc
e ??????????????? A actuarial reserves -
??????? M management - ?????????? E earnings -
?????? L liquidity - ??????????? S subsidiaries -
???????
32
The Regulatory Ladder ???????? ?????????????
Closing the company ????????
Seizing the company ?????????
??????????? ???????????? ????????
Cancel license ????? ???????? Suspend
license ??????????????? ????????
Barring directors from financial sector ??????
?? ??????? ?????????? ? ??????? Fine -
????? Public notice - ?????????
??????????? warning ??????????????
33
Reaction of Regulator ???????????? ??????????
Seriousness of Offense ??????????? ?????????
Degree of risk ??????? ?????
34
  • Regulate through reserves ????????????? ?
    ??????? ???????? ????????
  • Principles based approach ?????????????
    ???????????? ?? ?????????
  • Premiums do not need preapproval ???????????
    ???????? ?????? ?? ?????????

35
  • Allocation of personnel ??????????? ??????
  • Life companies fail because of bad assets
    ???????? ??????????? ????? ?????????? ??-??
    ???????????? ???????
  • Non life companies fail because of bad
    reinsurance ???????? ???? ????? ???????????
    ??-?? ????????????? ???????????????

36
Does the Regulator do his job well? ?????? ??
????????? ????????? ???? ???????
A / Main objectives ???????? ???? B / Balanced by ????????????? ??????
Prevent undue loss to policyholders - ????????????? ???????????? ?????? ??? ???????????????? Encourage competition in market place -?????????????? ??????????? ?? ????????? ?????
Maintain confidence in financial system -???????????? ??????????? ? ?????????? ??????? Provide cost effective service -????????????? ??????????? (????/????????) ??????
37
Preventing Undue Loss to Consumers
????????????? ?????????? ?????? ????????????
  • Cents per Euro recovered on insolvencies
    ?????????? ??????? ? ??????? ???
    ????????????????????
  • Rating of companies in system ??????? ????????
  • Assets according to ratings ?????? ?
    ???????????? ? ?????????
  • Examine regulators predictions and solutions
    ???????? ?????????????? ? ??????? ??????????

38
Maintain confidence in financial system
???????????? ??????? ? ?????????? ???????
  • Polls of - ??????
  • Rating agencies ??????????? ????????
  • General population - ?????????
  • Financial industry executives ?????????????
    ?????????? ????????

39
Quality - ????????
40
Cost effective service ??????????? ??????
  • Effective staff ??????????? ????????
  • of staff with specified level of education
    ???? ??????????? ? ???????????? ???????
    ???????????
  • Departments measured against industry ?????? ??
    ????????? ?? ????????? ??????????
  • Cost effective ????????????? ??????
  • Regulatory burden ??????? ?????????????

41
Priorities of regulator ?????????? ??????????
  • Question each function ???????????? ??????
    ???????
  • Principles based system reduces tasks ??????,
    ???????????? ?? ????????? ????????? ????? ???????
    ? ????? ???????
  • Corporate governance enhances supervision and
    reduces cost ????????????? ?????????????
    ????????? ?????? ? ????????? ??? ?????????

42
corporate governance
????????????? ??????????
43
Corporate Governance ????????????? ??????????
  • Ethical manner
  • - ??????? ?????????

(2) Fair to all stakeholders ???????????? ??
???? ??????????
(4) Policies procedures disclosed and
understood ???????? ? ???????? ???? ? ???????
(3) Without conflicts of interests ???
????????? ????????
44
Manufacturing Companies ????????????????
????????
One person owns 60 of shares ???? ???????
??????? 60 ?????
Many own the other 40 - ?????????? 40
??????????? ????????? ?????
45
Conclusion 1 Corporate governance must protect
the interests of minority shareholders
????? 1 ?????? ?????????????? ?????????? -
?????? ????????? ???????????? ??????????.
46
Private Companies ??????? ????????
The single owner can ???????????? ????????
????? pay himself whatever salary ???????
???? ????? ?????? ???????? pay whatever dividends
??????????? ????? ????????? sell his shares at
whatever price ????????? ???? ????? ?? ?????
????
One person owns 100 of shares ??????
????????? ??????????? 100 ?????
47
Conclusion 2 There is great difference in the
required attitudes of senior executives in public
and private companies. Some senior executives
are very good in one type of company but not good
at all in the other.
????? 2 ?????????? ??????? ??????? ?
???????????, ????????????? ? ??????? ???????????
???????????? ???????? ? ??????? ????????.
????????? ???????????? ????? ?????? ??? ??????
???? ???????? ? ?????????? ?????????? ???
??????.
48
Other Industries ?????? ???????
  • Corporate governance is not the same in all
    industries.
  • ????????????? ?????????? ?? ????????? ??? ????
    ????????

49
  • Good corporate governance ??????? ??????????
  • Increases customers ???????? ? ????? ?????
    ????????????
  • Increases profits ???????? ???????
  • Good corporate governance is good for all stake
    holders
  • ??????? ????????????? ?????????? ?????? ??? ????
    ??????????

50
Financial Institutions ?????????? ????????
  • Banks ?????
  • Insurance companies ????????? ????????
  • Pension funds ?????????? ?????
  • Three most important stakeholders the customers,
    the customers and the customers
  • ??? ??????? ????????? ???????????, ??????????? ?
    ???????????

51
Conclusion 3 Corporate governance for financial
institutions is focused on the customers not the
shareholders.
????? 3 ????????????? ?????????? ? ??????????
???????????? ?????? ???? ?????????? ??
????????????, ? ?? ?? ??????????.
52
Relations with a manufacturer ?????????????? ?
?????????????? ????????????? ????? ???????
????? end when you buy a table. are minor
??? ?? ????? ???????. Relations with an
insurance company ?????????????? ?? ?????????
????????? for a life time ?? ???
????? critical to ones standard for living
????????????? ????? ??? ?????? ?????
53
Conclusion 4 The corporate governance of a
financial institution must exceed that of a
manufacturing company
????? 4 ??????? ?????????????? ?????????? ?
?????????? ???????????? ?????? ????????????
??????? ?????????????? ?????????? ?
???????????????? ?????????.
54
Development of Corporate Governance Driven by
Regulation ???????? ?????????????? ?????????? ???
???????? ?????????????
  1. Higher standards of corporate governance in the
    financial sector ????? ??????? ?????????
    ?????????? ? ?????????? ???????
  2. Corporate governance leads to fewer failures of
    institutions ??? ????????? ?????? ??????????
    ????? ?????????? ??????????
  3. Regulator would not need to expand its activities
    ?????? ??????????? ? ?????????? ?????????????
  4. Companies happy to change management style to
    reduce the threat of more regulation ????????
    ???? ???????? ????? ?????????? ????? ????????
    ?????? ??? ???????? ?????????????

55
  • Conclusion 5 Corporate governance is good for
    both companies and regulators.

????? 5 ????????????? ?????????? ???????? ???
????????? ????????, ??? ? ????????? ??????????.
56
Corporate Governance and the Sale of Companies
????????????? ?????????? ? ??????? ????????
  • The buyers want - ?????????? ?????
  • Trustworthy financial statements ????????
    ?????????? ??????????
  • Few secrets that could result in court suits
    ????? ???? ?????? ????????, ??????? ?????
    ???????? ? ???
  • Full disclosure of problems ?????? ?????????? ?
    ???????????? ?????????
  • The sellers should - ???????? ?????
  • Ensure corporate governance principles are in
    place and adhered to
  • ????? ???????? ?????????????? ??????????
    ???????????

57
  • Conclusion 6 Good corporate governance enhances
    value

????? 6 ??????? ????????????? ??????????
??????????? ????????? ????????
58
  • Conclusion 7 Corporate governance standards
    must exceed what is required by law

????? 7 ????????? ?????????????? ??????????
?????? ???????????? ??????????? ???????????????
??????????
59
Corporate Governance Within a Financial Company
????????????? ?????????? ? ?????????? ????????
?????????
????? ??????????
???????????
60
  • Conclusion 8 It is in the best interest of the
    Board of Directors to have good corporate
    governance.

????? 8 ??????? ????????????? ??????????
???????? ????????? ?????? ??????????
61
Specific Corporate Governance Principles
????????????? ???????? ?????????????? ??????????
62
Specific CG Principles ????????????? ????
?????????????? ??????????
  • 1. ? ??????????? ?????? ?????????? ??????
    ??????????? ????????? ? ??????????? ????????????
    ?????? ? ?????????? ???????, ??? ???????? ???????
    ???????? ???????? ??????????? ??????? ??????????.
  • Succession planning - ????????????????
    ????????????
  • Selection of CEO - ????? ???????????
  • Strategic planning - ?????????????? ????????????
  • Risk assessment controls - ?????? ?????
    ????????
  • Management performance - ???????? ??????
    ???????????
  • Financial statements - ?????????? ??????????

63
Specific CG Principles ????????????? ????
?????????????? ??????????
  • 2. The Board should contain outside independent
    directors ????? ?????? ???????? ???????
    ??????????? ??????????
  • Maybe the majority of directors - ????? ???? ????
    ??????????? ??????????
  • Independent members should meet privately
    -??????????? ????? ?????? ?????? ???????????
    ????????

64
Specific CG Principles ????????????? ????
?????????????? ??????????
  • 3. The Board must have directors who are
    knowledgeable in the field
  • Continuing education opportunities for directors
  • 3. ????? ?????????? ?????? ???????? ??????????,
    ?????????? ????????????? ? ?????? ???????
  • ??????????? ??????????? ??????????? ???
    ??????????

65
Specific CG Principles ????????????? ????
?????????????? ??????????
  • 4. CEO Chairman of the Board

??????????? ????????
???????????? ?????? ??????????
66
Specific CG Principles ????????????? ????
?????????????? ??????????
  • 5. The Board shall establish an internal auditor
    who will report directly to the Board, not to
    management

??????? ?????????? ?????? ???? ?????? ?????
??????????? ??????, ???????? ??????????? ??????
??????????, ? ?? ???????????.
67
Specific CG Principles ????????????? ????
?????????????? ??????????
  • 6. Audit committee ??????? ?? ??????
  • the majority are independent directors
    ??????????? ??????????? ?????????.
  • Review financial statements ????????????
    ??????????
  • appropriate internal controls ???????????????
    ?????????? ????????
  • effectiveness of controls ?????????????
    ????????
  • Review any transaction that could adversely
    affect the company ?????? ?? ????? ?????????,
    ??????? ????? ????????? ???????? ?? ????????

68
Specific CG Principles ????????????? ????
?????????????? ??????????
  • The Board is responsible for ????? ???????? ??
  • 7. the appointment of the external auditor
    ?????????? ???????? ????????
  • 8. annual audit ????????? ?????
  • 9. acceptable accounting standards
    ???????????? ????????????? ??????????

69
Specific CG Principles ????????????? ????
?????????????? ??????????
  • 10. Exit interviews for (????? ?? ??????)
  • Actuary - ????????
  • Accountant - ??????????
  • Internal auditor ??????????? ????????
  • External auditor -???????? ????????

70
Specific CG Principles ????????????? ????
?????????????? ??????????
  • 15. The Board must have annually reviewed written
    standards for ????? ?????? ????? ????????
    ?????????????????? ????????? ??
  • Investment practices ???????? ??????????????
  • Credit risk management ?????????? ??????????
    ???????
  • Foreign exchange risk management ??????????
    ?????? ????????? ?????
  • Securities portfolio management ??????????
    ????????? ?????? ?????
  • Real estate appraisals ?????? ????????????
  • Interest rate management ?????????? ??????????
    ???????
  • Liquidity management ?????????? ????????????
  • Internal controls ??????????? ????????
  • Product design and pricing ?????????? ????????
    ? ???????????? ??? ????

71
Specific CG Principles ????????????? ????
?????????????? ??????????
  • 16. Written position description ??????????
    ??????????? ??????????
  • ??? ???????????? ?????? ??????????
  • ??? ????????????? ?????????
  • Audit - ?? ??????
  • Compensation - ?? ???????????? (??????????????)
  • Conduct review - ???????????????
  • Corporate governance nominating - ?? ???????????

72
Specific CG Principles ????????????? ????
?????????????? ??????????
  • 17. The company should have a policy on
    communication with its customers including
    elements of product education.
  • ? ???????? ?????? ???? ??????????? ????????
    ?????????????? ?
  • ?????????????, ?????????? ???????? ??????????
    ???? ?????????

73
Specific CG Principles ????????????? ????
?????????????? ??????????
  • 18. The company must be run in a transparent
    manner ???????? ?????? ???????? ???????
  • All stakeholder have access to information ???
    ????????? ?????? ????? ?????? ? ??????????
  • company policies - ???????? ????????
  • Information ?????? ??????????
  • Board committees will be held responsible
    ???????? ?????? ?????????? ?????? ?????
    ???????????????

74
Specific CG Principles ????????????? ????
?????????????? ??????????
  • Board members can be indemnified only if they
    have acted honestly and in good faith in the best
    interests of the company and its contributors.
    ????? ?????? ?????????? ?????? ????????
    ??????????? ?????? ? ??? ??????, ???? ???
    ????????? ?????? ? ????????????? ?? ?????
    ???????? ? ?? ??????????.
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