Following a consultation process, the Central Bank of Ireland (the "CBoI") has introduced its Corporate Governance Code for Credit Institutions and Insurance Undertakings (the "Code") in November, 2010. The Code establishes a set of governance rules designed to ensure sufficient oversight exists and is exercised by boards of credit institutions and of insurance undertakings to minimise the effect of any future financial crises.
In this briefing we focus on the key provisions of the Code applicable to insurance undertakings in Ireland. For more detail on how to comply with the provisions of the Code, please contact Andrew Bates or David Nolan of Dillon Eustace.
At the outset it is important to note that the Code does not apply to:
(i) captive insurance undertakings;
(ii) special purpose reinsurance vehicles ("SPRVs"); or
(iii) foreign incorporated subsidiaries of an Irish insurance undertaking (the Code
recommends that such subsidiaries adopt equivalent good governance practices).
The Code will apply with effect from 1 January, 2011 and insurance undertakings will be given until 30 June, 2011 to implement any necessary changes. Where changes are required to board memberships then the CBoI shall extend the compliance period to 31 December, 2011 to allow insurance undertakings the time to identify and to assess suitable candidates.
Main highlights of the Code are:
the introduction of a definition of "Major Institution" with Major Institutions attracting more onerous obligations in certain areas; the imposition of minimum board sizes; the imposition of board composition requirements including requirements concerning board chairs, minimum number of independent non-executive board members, periodic board membership and individual membership reviews; the introduction of factors to determine "independence"; the imposition of limitations on number of directorships that a board member may hold; the imposition of requirements as to role of board chair; the imposition of obligations on director to report to CBoI material concerns regarding corporate governance which are not addressed by board within short timeframe; the imposition of requirement on boards to set and adopt risk appetite for the undertaking and to review annually; the imposition of a annual compliance statement requirement as to compliance with the Code; the imposition of conflicts of interest policies. Each of these requirements is outlined separately...