A Guide to Insurance: Combining Governance, Compliance and Regulation

A Guide to Insurance: Combining Governance, Compliance and Regulation

by Nigel Feetham, Robin Amos

Hardcover

$129.95

Product Details

ISBN-13: 9781907444463
Publisher: Spiramus Press
Publication date: 01/15/2012
Pages: 172
Product dimensions: 6.10(w) x 9.40(h) x 0.40(d)

Table of Contents

About the author iii

Contents v

Table of Cases x

Acknowledgment xi

Preface xiii

Introduction xv

1 The Concept of Risk in Commerce 1

1.1 Risk Management 4

1.2 Why do we have Regulation? 5

1.2.1 Rules-based regulation 7

1.2.2 Principles-based regulation 7

1.2.3 Risk-based regulation 8

1.3 What is Insurance? 8

2 Selection Of Domicile 11

2.1 Bermuda 13

2.2 Dubai 14

2.3 Malta 14

2.4 Dublin 14

2.5 Gibraltar 15

2.6 Guernsey 15

3 Business, market and regulatory issues for Captives and insurers 21

3.1 Captives - The Economic Basis for establishing Insurer must be sound 21

3.2 Key issues - Snap-shot of Current Trends 21

3.2.1 Business plans 21

3.2.2 Market and business 22

3.3 How to Manage Cost for a Captive? 23

3.3.1 Premiums 23

3.3.2 Coverage 23

3.3.3 Claims 24

3.4 Evolution of Insurance-a Case Study 24

3.5 Insurance Banana Skins 2011 - survey of the risks facing insurance industry 31

4 Insurance Company Failure 33

4.1 Quinn Insurance 34

4.2 American International Group, Inc. (AIG) 40

4.3 The Independent Insurance Company Limited 44

4.4 European Insurance Group (Malta) 47

4.5 HIH Insurance 51

4.5.1 Strategy and the board 52

4.5.2 A failure: the UK operations 53

4.5.3 A second failure: the US operations 54

4.5.4 A third failure: the FAI acquisition 54

4.5.5 The harbinger of doom: the Allianz joint venture 54

4.6 Compensation Schemes 56

5 Ownership, Management and Financing 59

5.1 Controller Suitability 59

5.2 Trust/Trustees 62

5.2.1 Undertakings from Trustees 64

5.3 Influence of Controllers 65

5.4 Managing Investment Risk 67

5.5 Managing Claims 69

5.6 Avoiding Unnecessary Complexity 70

5.7 Financing and Solvency 73

5.8 Financial Crime Risk and Mitigation 77

5.9 Risk of Regulatory Failure 78

5.10 Third Party Contracts 79

6 Supervision 83

6.1 Sienna Protocol 83

6.2 International Association of Insurance Supervisors 87

6.3 Codes of Conduct 92

6.3.1 The Irish Code of Conduct 93

6.3.2 The Bermuda Code 96

6.3.3 The Guernsey Code 98

6.3.4 Codes: concluding thoughts 100

6.4 Solvency II 104

6.5 Principles v Rules 105

7 System Of Governance 109

7.1 The Five Lines of Defence 110

7.2 Mind and Management 111

7.3 On-Site Inspections 115

7.3.1 Training and awareness 116

7.3.2 What are the possible questions and issues? 116

7.4 What happens after the on-site inspection? 119

7.5 Whistleblower 120

7.6 Walker Review 121

7.6.1 Board size, composition and qualification 123

7.6.2 Functioning of the board and evaluation of performance 124

7.6.3 The role of institutional shareholders: communication and engagement 126

7.6.4 Governance of risk 128

7.6.5 Remuneration 129

7.7 Emergence of International Standards and Best. Practice in relation to insurance regulation 132

8 Regulatory Arbitrage 135

8.1 Illustrative examples 138

8.1.1 Fronting Insurance 138

8.1.2 Transformers 140

8.2 Interest and currency rate insurance 141

8.3 Life policies 143

8.4 Other examples 144

8.4.1 Commission disclosure rules 144

8.4.2 The Bermuda branch route 144

8.5 Jurisdictional competition 145

8.6 Redomiciliation 147

8.7 Regulatory co-operation 150

9 A Guide To "ORSA" for Captives and Small Insurers 153

9.1 Solvency II - some background 153

9.1.1 Solvency II as World standard 155

9.1.2 Solvency II for captives and small insurers 155

9.1.3 Solvency II has three pillars 157

9.2 The theory of Pillar Two and "ORSA" 158

9.3 ORSA - a case study in governance design 164

9.3.1 Strategy and risk appetite 165

9.3.2 The four core principles 166

9.3.3 Principle one - board 167

9.3.4 Principle two - management 167

9.3.5 Principle three - risk assessment 168

9.3.6 Principle four - risk controls 169

9.3.7 Assessing the base of the pyramid - gap analysis 170

9.3.8 Constructing the risk register - the primary risk control tool 174

9.3.9 Calibration of the risk register 178

9.3.10 Secondary risk control tools 180

9.3.11 Board charter 180

9.3.12 Governance Committee 183

9.3.13 Audit committee 188

9.3.14 Directors' checklist 191

9.3.15 Outsourcing procedures 194

9.3.16 Business continuity 197

9.3.17 Threat matrix 198

9.3.18 Other risk control tools and compliance statements 200

9.3.19 Project planning for governance 201

9.3.20 Combining ORSA with Pillar One - towards a total view of capital requirements 203

9.3.21 Draft ORSA guidelines - analysis and implications 207

10 General Conclusion and Summary 215

11 Epilogue 217

Appendix 1 Board of Directors specimen terms of Reference and code of ethics 221

Background 221

Composition, Board Organisation and Meetings 221

Duties and Responsibilities 222

Specimen Code of Ethics 226

Introduction 226

Purpose of code 226

Use of Code 226

Relationship with Customers and Suppliers 226

Relationship with Shareholders 227

Relationship with Employees 227

Relationship with the Government, Regulator and Community 228

Compliance, Verification and Implementation 228

Whistle Blowing Policy 228

Appendix I 229

Employee Gifts & Entertainment form 229

Appendix 2 The Bermuda insurance code of conduct Code 231

Appendix 3 The Guernsey Code 251

Appendix 4 Insurance Intermediary Contract Clauses 265

Appendix 5 Corporate Governance Questionnaire 273

Appendix 6 Decision of the Irish High Court: Quinn Insurance Ltd 277

Index 283

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