Laws of Kenya ActiveThe Insurance (Corporate Governance) Guidelines, 2022
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LAWS OF KENYA THE INSURANCE (CORPORATE GOVERNANCE) GUIDELINES, 2022 NO. 3639 OF 2022 Revised and published by the National Council for Law Reporting with the authority of the Attorney-General as gazetted by the Government Printer www.kenyalaw.org published by the National Council for Law Reporting with the authority of the Attorney-General as gazetted by the Government Printer www.kenyalaw.org Kenya Insurance Act The Insurance (Corporate Governance) Guidelines, 2022 Gazette Notice 3639 of 2022 Legislation as at 29 March 2022 By Kenya Law and Laws.Africa. Share widely and freely. www.kenyalaw.org | [email protected] FRBR URI: /akn/ke/act/gn/2022/3639/eng@2022-03-29 There is no copyright on the legislative content of this document. This PDF copy is licensed under a Creative Commons Attribution NonCommercial ShareAlike 4.0 License (CC BY-NC- SA 4.0). This license enables reusers to distribute, remix, adapt, and build upon the material in any medium or format for noncommercial purposes only, and only so long as attribution is given to the creator. If you remix, adapt, or build upon the material, you must license the modified material under identical terms. CC BY-NC-SA includes the following elements: • BY: credit must be given to the creator. • NC: Only noncommercial uses of the work are permitted. • SA: Adaptations must be shared under the same terms. Share widely and freely. the creator. • NC: Only noncommercial uses of the work are permitted. • SA: Adaptations must be shared under the same terms. Share widely and freely. The Insurance (Corporate Governance) Guidelines, 2022 (Gazette Notice 3639 of 2022) Contents STATEMENT OF INTENT .................................................................................................................................................................................... 1 1. Citation ................................................................................................................................................................................................................ 1 2. Interpretation .................................................................................................................................................................................................... 1 3. Application ......................................................................................................................................................................................................... 2 4. Purpose ................................................................................................................................................................................................................ 2 5. ................................................................................................................................................. 2 5. General Principles ........................................................................................................................................................................................... 2 6. Governance Structure of the Board .......................................................................................................................................................... 2 7. Responsibility of the Board ......................................................................................................................................................................... 3 8. Fiduciary Duties ............................................................................................................................................................................................... 4 9. Fit and Proper Criteria .................................................................................................................................................................................. 4 10. ................................................................................................................................................ 4 10. Role of the Chairperson ............................................................................................................................................................................. 4 11. Board Committees ........................................................................................................................................................................................ 4 12. Committees in Charge of Audit Function ............................................................................................................................................ 5 Section 13. .............................................................................................................................................................................................................. 5 14. Committee in Charge of Policyholder Protection ............................................................................................................................. 5 15. yholder Protection ............................................................................................................................. 5 15. Ethics Function .............................................................................................................................................................................................. 5 16. Committee in Charge of Nomination and Remuneration Function ............................................................................................ 6 Section 17. ............................................................................................................................................................................................................... 6 18. Board Performance and Evaluation ....................................................................................................................................................... 6 19. Role of Principal Officer ............................................................................................................................................................................. 6 20. Company Secretary ...................................................................................................................................................................................... 6 21. ................................................................................................................................................ 6 21. Enforcement .................................................................................................................................................................................................... 6 .................................................................................................................................................... 6 The Insurance (Corporate Governance) Guidelines, 2022 (Gazette Notice 3639 of 2022) Kenya INSURANCE ACT THE INSURANCE (CORPORATE GOVERNANCE) GUIDELINES, 2022 GAZETTE NOTICE 3639 OF 2022 Published in Kenya Gazette Vol. CXXIV—No. 56 on 29 March 2022 Commenced on 29 March 2022 STATEMENT OF INTENT THE Insurance (Corporate Governance) Guidelines are made by the Insurance Regulatory Authority pursuant to section 3A (1) (g) of the Insurance Act and are intended to set minimum standards of good corporate governance practices by the entities. The aim is to promote the development, implementation and effective oversight of policies that clearly define and support the objectives of the entity, defining the roles and responsibilities of persons accountable for the management and oversight of an entity, setting requirements relating to how decisions and actions are taken, providing for communication, as appropriate, on matters relating to the management, conduct and oversight of the entity to stakeholders, and providing for corrective actions to be taken for non–compliance or weak oversight, controls or management. 1. sight of the entity to stakeholders, and providing for corrective actions to be taken for non–compliance or weak oversight, controls or management. 1. Citation These Guidelines may be cited as the Insurance (Corporate Governance) Guidelines, 2022. 2. Citation These Guidelines may be cited as the Insurance (Corporate Governance) Guidelines, 2022. 2. Interpretation In these Guidelines, unless the context otherwise requires— “Board” means the Board of Directors of the regulated entity; “corporate governance” means the systems, structures, policies and processes through which a regulated entity is managed and controlled; “control function” means a function that is independent and provides the insurer’s board of directors and management with an independent assessment of the quality and effectiveness of an insurers’ internal control systems which include, risk management, actuarial, compliance and internal audit; “fiduciary relationship” means the legal or ethical relationship between two or more parties; “management staff” means the principal officer and the direct reports; “Non-Executive Director” means a member of a board of an entity who is not involved in the day to day management of the entity; “fit and proper criteria” means an assessment of the suitability of significant owners, board members, management staff and heads of control functions with respect to qualifications, financial soundness and integrity; “regulated entity” means an insurer, insurance broker and bank assurance intermediary registered under the Act; and “principal officer” means the Chief Executive Officer or Managing Director approved by the Authority and responsible for the general control, direction and supervision of the regulated entity. ive Officer or Managing Director approved by the Authority and responsible for the general control, direction and supervision of the regulated entity. 1 1 The Insurance (Corporate Governance) Guidelines, 2022 (Gazette Notice 3639 of 2022) Kenya 3. Application These Guidelines shall apply to regulated entities. 4. Purpose The purpose of these Guidelines is to set minimum standards of good corporate governance practices by the entities. 5. General Principles A regulated entity shall develop a corporate governance framework— (a) to promote the development, implementation and effective oversight of policies that clearly define and support the objectives of a regulated entity; (b) to define the roles and responsibilities of persons accountable for the management and oversight of a Regulated Entity; (c) to set requirements relating to how decisions and actions are taken; (d) to provide for communication as appropriate, on matters relating to the management, conduct and oversight of a regulated entity to its stakeholders; (e) to provide for corrective actions to be taken for non compliance or weak oversight, controls or management, and; (f) to adequately recognise and protect the interest of policy holders. 6. be taken for non compliance or weak oversight, controls or management, and; (f) to adequately recognise and protect the interest of policy holders. 6. Governance Structure of the Board (1) The board shall ultimately be accountable and responsible for the corporate governance framework. (2) A regulated entity shall have an effective board that is accountable and responsible for the performance and conduct of its business. (3) Delegation of board’s functions to board committees or management does not absolve the board of its responsibilities. (4) A regulated entity shall ensure that the management and board functions are clearly separated to enable the board to exercise its oversight function over management. (5) A regulated entity shall ensure that the corporate governance framework meets the expectations of all its stakeholders. (6) A regulated entity shall ensure that no member of its management sits in the board as a member except the Principal Officer. (7) A regulated entity shall have an adequate number of board members that enable it to carry out its functions effectively and efficiently. (8) Where the constitutive documents of the entity allow for the appointment of an alternate director, such an appointment shall be subject to approval by the Authority. itutive documents of the entity allow for the appointment of an alternate director, such an appointment shall be subject to approval by the Authority. (9) A regulated entity shall ensure that one third of the board members are independent directors who shall not hold office for more than six years. (10) An independent director shall be a person who— (a) has not been employed by a regulated entity within the preceding five (5) years; (b) is not associated to an adviser or consultant to a regulated entity or a member of the entity’s management staff or a significant customer or supplier of the entity or with an organization 2 ltant to a regulated entity or a member of the entity’s management staff or a significant customer or supplier of the entity or with an organization 2 The Insurance (Corporate Governance) Guidelines, 2022 (Gazette Notice 3639 of 2022) Kenya that receives significant contributions from the entity or within the preceding five (5) years, has not had any business relationship with the entity; (c) has no personal service contract(s) with a regulated entity or a member of the entity’s employees; (d) is not a member of the immediate family of any person described above; or (e) has not had any of the relationships described above with any affiliate of the entity. (11) The board shall be composed of individuals with a balance of skills, diversity and expertise, who collectively possess the necessary qualifications commensurate with the size, complexity and risk profile of the entity. (12) The Principal Officer shall be an ex-officio member of the board with no right to vote at the board meetings. (13) All board members shall train on corporate governance with an institution recognized by the Authority. (14) The board of a regulated entity shall have and maintain the necessary skills, knowledge and understanding of the entity’s business to be able to fulfil their roles. regulated entity shall have and maintain the necessary skills, knowledge and understanding of the entity’s business to be able to fulfil their roles. (15) The board of an entity shall establish and periodically review a board charter which defines the respective roles, responsibilities and functions of the board. 7. an entity shall establish and periodically review a board charter which defines the respective roles, responsibilities and functions of the board. 7. Responsibility of the Board The board shall— (a) set a regulated entity’s strategic objectives, the means of attaining the objectives and the procedures for monitoring and evaluating the progress made towards achievement of the objectives; (b) select, monitor and where necessary replacement of key executives and overseeing succession planning; (c) develop and implement human resource policies including a remuneration policy that is reviewed periodically which does not induce excessive or inappropriate risk taking; (d) be in charge of the overall direction of the business of the entity, including capital management, revenue streams, expenses and profitability; (e) align the corporate culture, corporate activities and behavior with the expectation that the entity will operate in a safe and sound manner, with integrity and in compliance with applicable laws, regulations and guidelines; (f) ensure that the entity has appropriate systems and functions for risk management and internal controls and to provide oversight to ensure that these systems and the functions that oversee them are operating effectively and as intended; (g) set out nomination and appointment procedures, structure, function, re–election, removal and balance the board composition depending on the nature, scale and complexity of a regulated entity; (h) set a regulated entity’s values and ethical standards standards, including and ensure that obligations to policyholders and other stakeholders are met; (i) devise policies to govern related party transactions; (j) establish a policy on declaration of dividends to shareholders and participating policyholders if applicable; (k) set out policies dealing with conflict of interest, fair treatment of customers and information disclosure; 3 ipating policyholders if applicable; (k) set out policies dealing with conflict of interest, fair treatment of customers and information disclosure; 3 The Insurance (Corporate Governance) Guidelines, 2022 (Gazette Notice 3639 of 2022) Kenya (l) prepare financial statements and accounts; and (m) inculcate an appropriate risk culture throughout the entity. 8. Fiduciary Duties (1) The board shall establish clear roles and responsibilities in discharging its fiduciary and leadership functions. 2) In exercising fiduciary duties, each board member shall— (a) exercise reasonable degree of care, skill and diligence; (b) act in the best interests of the company and not for any other purpose; (c) honestly at all times and shall not place themselves in a situation where personal interests conflict with those of the company; (d) at all times exercise independent judgement; (e) devote sufficient time to carry out their responsibilities and enhance their skills; (f) promote and protect the image of the company; (g) owe their duty to the company and not to the nominating authority; and (h) owe the company a duty to hold in confidence all information available to them by virtue of their position as a board member. 9. Fit and Proper Criteria The directors of an entity shall meet the “fit and proper criteria” as defined under paragraph 1. 10. on as a board member. 9. Fit and Proper Criteria The directors of an entity shall meet the “fit and proper criteria” as defined under paragraph 1. 10. Role of the Chairperson The Chairperson of the board shall be an independent director who shall provide leadership to the board for its proper and effective functioning. 11. Board Committees (1) The board shall establish board committees, depending on the nature, scale and complexity on the entity, to assist in discharging its duties and responsibilities. (2) The Committees of the Board shall include— (a) audit; (b) risk management; (c) policyholder protection; (d) finance and investment; and (e) ethics and compliance. (3) The Board shall be responsible for monitoring and oversight of the committees. (4) The committees of the board shall be composed of at least three members at any onetime to assist in discharging its duties and responsibilities. (5) The chairperson of the board shall not be a member of any board committee. (6) Where a committee of the board performs more than one function, the board shall ensure such a combination does not compromise the integrity or effectiveness of the combined functions. 4 orms more than one function, the board shall ensure such a combination does not compromise the integrity or effectiveness of the combined functions. 4 The Insurance (Corporate Governance) Guidelines, 2022 (Gazette Notice 3639 of 2022) Kenya (7) The committees of the board shall have clearly defined mandates, authority to carry out their respective functions and the degree of independence and objectivity as appropriate to the role of the committee. (8) The chairperson of the committee in charge of the audit shall be an independent director of the board with accounting, finance or audit knowledge and experience. (9) The Principal Officer shall not be a member of the Audit Committee. 12. Committees in Charge of Audit Function The committee in charge of the audit function shall perform among others the following responsibilities— (a) provide an independent review of the effectiveness of the financial reporting process and internal control systems; (b) review the effectiveness of the internal audit function; and (c) recommend to the board for the appointment, re appointment, dismissal, remuneration and terms of engagement of the external auditors and appointed actuaries. 13. o the board for the appointment, re appointment, dismissal, remuneration and terms of engagement of the external auditors and appointed actuaries. 13. (1) The committee of the board in charge of the risk management function shall ensure that the management maintains a sound risk management system and internal controls to safeguard policyholder’s interest and the entity’s assets. (2) The committee shall determine the nature and extent of the significant risk which the board is willing to take in achieving its strategic objectives. (3) The committee shall maintain a group–wide and aggregated view on the risk profile of the entity in addition to the individual risk profile. 14. Committee in Charge of Policyholder Protection (1) The committee in charge of policyholder protection shall develop a mechanism of keeping the policyholders well informed and educated about insurance products, claims and complaint- handling procedures. (2) The procedure shall at a minimum— (a) set out a policy on fair treatment of customers and monitor its implementation; (b) put in place proper procedures and effective mechanism to address complaints and grievances of policyholders; and (c) have fully documented internal procedures for resolving disputes between the customer and the entity or any other person acting on behalf of the entity. 15. ully documented internal procedures for resolving disputes between the customer and the entity or any other person acting on behalf of the entity. 15. Ethics Function Board’s responsibilities in respect to the ethics functions shall be— (a) to establish and embed corporate ethical values, the ethics policy and code, ensure and monitor ethical business practices; (b) to set out a policy on anti-fraud and anti-corruption and monitor its implementation; (c) to supervisee and monitor matters reported using the entity’s whistle blowing or other confidential mechanisms for employees and others to report ethical and compliance concerns or potential breaches or violations; and 5 blowing or other confidential mechanisms for employees and others to report ethical and compliance concerns or potential breaches or violations; and 5 The Insurance (Corporate Governance) Guidelines, 2022 (Gazette Notice 3639 of 2022) Kenya (d) approve compliance framework, review their effectiveness on a regular basis and signoff on any material compliance issues or matters. 16. Committee in Charge of Nomination and Remuneration Function The committee in charge of nomination and remuneration function shall set up a policy on nomination, remuneration and performance of the board, Principal Officer, management and persons in control functions of the entity. 17. (1) Management staff shall oversee the operations of the entity and provide direction on a day-to-day basis, subject to the objectives and policies set out by the board of directors, as well as other legal requirements. (2) Management staff shall provide the board with comprehensive, relevant and timely information to enable the review of business objectives, business strategy and policies, and to hold Management staff accountable for performance. 18. Board Performance and Evaluation (1) The board shall— (a) determine the board performance evaluation criteria; and (b) undertake an annual evaluation of board performance. Evaluation (1) The board shall— (a) determine the board performance evaluation criteria; and (b) undertake an annual evaluation of board performance. (2) The evaluation shall cover the board, committees of the board individual members, the chairperson, the Chief Executive Officer and the Company Secretary. 19. Role of Principal Officer (1) The Principal Officer shall be the link between the board and management of the entity. (2) The Principal Officer shall be responsible to the Board for the day to day running of the entity and shall— (a) ensure that the policies set out by the Board in the overall corporate strategy are implemented; (b) establish and maintain efficient and adequate internal control systems; and (c) design and manage the necessary management information system in order to facilitate efficient and effective communication within the institution. 20. Company Secretary A regulated entity shall have a Company Secretary who shall provide guidance to the board on their duties and responsibilities and on matters of governance. 21. Enforcement Where the Authority determines non–compliance with the provisions of these Guidelines, it may take any intervention prescribed in the Act. 6
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