Framing the Future of Corporate Governance
For insurance companies, the time to look ahead is now
The National Association of Insurance Commissioners’ (NAIC) Executive (EX) Committee/Plenary approved the proposal for the Corporate Governance (E) Working Group (CGWG) to develop a new model law, which would facilitate the annual collection of information regarding insurers' corporate governance practices. An insurer will now be required to provide its regulator with a summary of its corporate governance framework and practices annually, instead of every three to five years, as is done now. The proposed framework summary would include five sections:
- Discussion of significant changes from prior year
- General description of the organization’s corporate governance framework
- Description of board of directors and committee policies and practices
- Description of management policies and practices
- Management and oversight of critical risk areas
In addition to annual reporting, insurers will be required to provide an increased level of compensation disclosure and maintain an effective internal audit function for exceeding premium thresholds (the model law development request sets $500 million in annual premiums as the threshold requirement).
We believe that the enhanced NAIC governance requirements offer a unique opportunity for insurance companies to step back and consider their current governance framework, rather than to simply report what has always been. A more complete overview of the framework can be found in our publication, Framing the future of corporate governance: Deloitte Governance Framework.
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