Risk Based Supervision: Course Outline on Management of Insurance Companies

Corporate powers are exercised by these bodies in accordance with the company's Articles of Incorporation or Memorandum of Association. The board of directors is responsible for providing stewardship and oversight of management and operations of the institution. It is the ultimate repository of powers and authority in the management and operation of the company. The board of directors is responsible for laying policies and procedures that direct the manner in which business affairs of the company are to be carried out. The board must also ensure that company resources are utilized and safeguarded against misuse or abuse. The board of directors is duty-bound to perform its functions along the principles of legality, transparency, responsibility, and accountability of actions. The board of directors delegates certain of its powers and responsibilities to senior officers, who are responsible for the day-to-day conduct of the company's operations. However, the board of directors remains accountable for the results of any delegated power or function. The board of directors must remain vigilant over the actions and functioning of the company's senior officers and ensure that they perform their functions effectively in compliance with all applicable laws and regulations. Risk-based supervision looks at and assesses the risks faced by an insurance company in relation to the quality of its management. The quality of management is assessed in terms of the knowledge of the business, honesty, and integrity of the board members and senior management. The formulation, adoption, and execution of defensible strategic plans are indispensable to achieving growth and profitable insurance business. The risk of loss, misuse, or abuse of company resources is greater where managers have inadequate knowledge of the business, lacking in honesty and credibility, and/or lacking in sensitivity to the protection of the company's interests. To minimize this risk, the selection of members of the board of directors and its key officers should undergo a "fit and proper" test or measurement. The fit and proper test includes the following criteria: appropriate education, not a member or key officer of another insurance company or subsidiary company of insurance companies, not been a director or officer of a business entity that was subject to bankruptcy or involuntary liquidation, not been convicted of a crime involving dishonest or immoral conduct, and not a related party to a person or entity having a qualified participation in the insurance company. The board of directors plays a crucial role in the management of an insurance company. It is responsible for providing stewardship and oversight of management and operations of the institution. The board must ensure that the company is prudently and professionally managed. The risk-based supervision approach requires regulators to look beyond the requirements prescribed by law or regulations to obtain reasonable assurance that every insurance company is prudently and professionally managed. The board of directors must remain vigilant over the actions and functioning of the company's senior officers and ensure that they perform their functions effectively in compliance with all applicable laws and regulations. The board of directors must also ensure that the company is managed in a way that minimizes the risk of loss, misuse, or abuse of company resources.