Governance in Mutuals:A Discussion

Six topics ......

• Responsibility of directors

• Competence and integrity

• Internal audit and risk committees

• An increasing international framework – Solvency II

• RDR

• Chrysalis

Six topics ......

• Responsibility of directors

• Competence and integrity

• Internal audit and risk committees

• An increasing international framework – Solvency II

• RDR

• Chrysalis

Responsibility of Directors

• Boards need to play an even bigger role

• Increased need for discussion and challenge

• Need to challenge the business model

• Non executives – the impossible job

• The limits of outsourcing

• SIF interviews

Six topics ......

• Responsibility of directors

• Competence and integrity

• Internal audit and risk committees

• An increasing international framework – ICAS and Solvency II

• RDR

• Chrysalis

Competence and integrity

• Some failures across financial services over past 3 years due to lack of Board competence.

• But also a failure of culture and behaviour• Public has a poor view of financial

services• Hector Sants speech on 4th October• But ultimately culture is in the Board’s

hands• The real challenge of the next 10 years • And mutuals should have an advantage

Six topics ......

• Responsibility of directors

• Competence and integrity

• Internal audit and risk committees

• An increasing international framework – ICAS and Solvency II

• RDR

• Chrysalis

Internal audit and risk committees

• Familiar with internal audit committees

• Risk committee more recent

• Risk committee provides the catalyst and information for Board challenge

• Combine with audit or separate?

• Real challenge and not just a risk bureaucracy

Six topics ......

• Responsibility of directors

• Competence and integrity

• Internal audit and risk committees

• An increasing international framework – Solvency II

• RDR

• Chrysalis

Background to SII .....

• UK ahead of the game with ICAS

• Directive and non-directive firms

• SII is a European initiative and replaces ICAS

• SII is not just ICAS plus

• Some current non-directive firms will fall into SII

• And SII requires FSA to become more involved in firms governance

Key SII issues .....

• Need to choose internal or standard model

• Do not underestimate complexity and amount of work under internal model

• High level of documentation• The IMAP process is challenging• Skills are in short supply and costly• Importance of Board education• Importance of sharing

Six topics ......

• Responsibility of directors

• Competence and integrity

• Internal audit and risk committees

• An increasing international framework – Solvency II

• RDR

• Chrysalis

RDR

• Additional strain

• IFAs face a more challenging world

• Will impact insurers’ systems and procedures

Six topics ......

• Responsibility of directors

• Competence and integrity

• Internal audit and risk committees

• An increasing international framework – Solvency II

• RDR

• Chrysalis

Chrysalis

• With profit policyholders have far reaching entitlements as policyholders and members

• Restricts firms actions, particularly when new business is declining

• Boards can use profits to invest in new product lines when it can be shown not to harm position of policyholders

• But difficult to justify a major departure

Six topics ......

• Responsibility of directors

• Competence and integrity

• Internal audit and risk committees

• An increasing international framework – Solvency II

• RDR

• Chrysalis