Governance in Mutuals: A Discussion

1. Governance in Mutuals:A Discussion

2. Six topics ...... • Responsibility of directors • Competence and integrity • Internal audit and risk committees • An increasing international framework • Solvency II • RDR • Chrysalis

3. Six topics ...... • Responsibility of directors • Competence and integrity • Internal audit and risk committees • An increasing international framework • Solvency II • RDR • Chrysalis

4. 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

5. Six topics ...... • Responsibility of directors • Competence and integrity • Internal audit and risk committees • An increasing international framework • ICAS and Solvency II • RDR • Chrysalis

6. 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

7. Six topics ...... • Responsibility of directors • Competence and integrity • Internal audit and risk committees • An increasing international framework • ICAS and Solvency II • RDR • Chrysalis

8. 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

9. Six topics ...... • Responsibility of directors • Competence and integrity • Internal audit and risk committees • An increasing international framework • Solvency II • RDR • Chrysalis

10. 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

11. 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

12. Six topics ...... • Responsibility of directors • Competence and integrity • Internal audit and risk committees • An increasing international framework • Solvency II • RDR • Chrysalis

13. RDR • Additional strain • IFAs face a more challenging world • Will impact insurers’ systems and procedures

14. Six topics ...... • Responsibility of directors • Competence and integrity • Internal audit and risk committees • An increasing international framework • Solvency II • RDR • Chrysalis

15. 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

16. Six topics ...... • Responsibility of directors • Competence and integrity • Internal audit and risk committees • An increasing international framework • Solvency II • RDR • Chrysalis