OECD Guidelines on Insurer Governance

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The OECD Guidelines on Insurer Governance offer a comprehensive set of principles on the governance of insurers that are intended to provide guidance and serve as a reference point for insurers, governmental authorities, and other relevant stakeholders in OECD and non-OECD countries. As financial institutions whose business is the acceptance and management of insurable risk, insurers should have sound governance and risk management practices so that they will be in a position to provide promised benefits to policyholders and beneficiaries and thus fulfil their insurance function in the economy.

The Guidelines on Insurer Governance emphasise the following key elements of insurer governance: an expected prudent approach to business and financial strategies; a well developed risk culture and risk management and internal control systems, supported by effective and independent control functions and integrated firm-wide reporting; sound compensation arrangements; a high level of financial expertise among board members and within senior management; and policies and procedures that ensure proper treatment of customers and policyholders. The Guidelines complement the OECD Principles of Corporate Governance, one of the twelve key Financial Stability Board standards for sound financial systems.

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Detailed annotations

The governance structure of an insurer should have an appropriate allocation of oversight and management responsibilities to provide for effective authority and efficient decision–making in the insurer, while ensuring adequate checks and balances and oversight so as to prevent poor or conflicted decision– making or mismanagement, establish proper accountability and sound incentives, and thereby protect shareholders (or member–policyholders) and the interests of policyholders and, as appropriate, other stakeholders such as employees. This allocation should be clearly established and made transparent internally and externally.

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