Chapter 2 - Insurance Businesses: Roles and Responsibilities Flashcards
What are the two types of director?
Executive Directors and Non-Executive Directors
What is an Executive Director?
- Work full time in the company.
- Given management responsibility for running parts of the business.
- One is usually appointed by the board to be accountable for the running of the company on a day-to-day basis – known as either the chief executive officer (CEO) or managing director.
- CEO/managing director appoints the company management.
What is a Non-Executive Director?
- Work part time in the company.
- Chosen for their particular area of expertise.
- Do not perform an executive management role in the company.
- Attend board meetings and may be members of subcommittees in order to provide independent views on matters such as audit, management remuneration and risk management.
Most boards have five main responsibilities; name them.
- Regulation of the executive directors and other members of the senior management team to ensure they uphold the shareholder interests and the laws governing the conduct of the business.
- Approve the report and accounts, annual budgets, strategy and other important plans.
- Selecting, appraising and rewarding the CEO and ensuring succession planning is actively addressed.
- Overseeing the risk management process and ensuring the necessary actions are adopted to mitigate against identified risks.
- Ensuring that the company’s integrity and principles are upheld on critical matters such as financial reporting accuracy, legal and regulatory compliance, as well as adherence to the company’s stated ethical standards.
What does the UK Corporate Governance Code set out?
It sets out good practice standards for the UK, covering issues such as:
- Board composition and Development
- Remuneration
- Accountability and Audit
- Relations with Shareholders
What is the UK Corporate Governance Code appended to?
The UK Listing Rules
What does the UK Listing Rules require?
Listed companies to report that they are compliance with the UK Corporate Governance Code or explain any areas of non-compliance
What is the link between the board and the management of the company?
The CEO or managing director (or general manager with a seat on the board if there is no managing director)
What is the managing director responsible for?
The business’ functions and day-to-day activities of the company
What is the FD (Financial Director) typically have responsibility for?
- The economic capital model to assist in the determination of the appropriate level of capital for the company to hold
- Stress and scenario testing to assist in the determination of the amount of extreme risk the company may be subject to
Proposals to the board on the form of capital to hold in addition to equity capital, such as subordinated debt - Preparation of papers for the board to assist in the determination of the appropriate level of dividend to pay to shareholders
- Making recommendations to the board on the appropriate level of claims provisions to hold
- Preparation of the statutory accounts of the company for approval by the board and shareholders
- Making presentations to, and managing the relationships with, the investment analysts who prepare reports on the company’s performance and holders of the company’s debt
- Preparation of the financial information required by the PRA and be one of the main contacts the PRA has with the company
- Preparation of the management information, such as leading indicators of financial performance, for the executive team and the board
- Management of debt, cash flow, liquidity and treasury matters
- Management of the investment portfolio
- Management of the financial aspects of the planning process, the budgetary process and the forecast process
- Preparation for the reviews by rating agencies
- Preparation and planning for the statutory external audit conducted by the independent auditors
- Management of the reinsurance accounting process
- Potentially other responsibilities such as IT operations, reinsurance strategy, training and risk management.
Public companies are obliged to have a company secretary, true or false?
True
Private companies are obliged to have a company secretary, true or false?
False, as a result of the Companies Act 2006, from 2008 the post became optional for private companies unless their articles of association explicitly require them to have one
What does a company secretary typically do?
- Maintaining the company’s statutory books
- Filing annual returns at Companies House
- Arranging meetings of the directors and the shareholders
- Informing Companies House of any significant changes in the company’s structure or management
- Establishing and maintaining the company’s registered office as the address for any formal communications
- Ensuring the security of the company’s legal documents, including for example, the certificate of incorporation and memorandum and articles of association
- Deciding on the company’s policy for the filing and retention of documents
- Advising directors on their duties and ensuring that they comply with corporate legislation and the articles of association of the company
Chief Actuaries are statutory appointments, true or false?
For life insurers, they are a statutory appointment, however, actuaries are widely employed in both life and non-business
What is the chief actuary responsible for?
- Technical pricing of new and existing products
- Calculation of claims reserves
- Calculation of risk-based capital requirements
- Assessment of investment risk for funds supporting technical reserves
Name nine senior positions (separate to CEO, CFO, Company Secretary and Chief Actuary)
- Chief risk officer
- Head of internal audit
- Underwriting director
- Claims director
- Marketing director
- Head of HR
- Head of IT
- Strategy director
- Investment director
In broad terms, what is the role of management?
To manage the process of planning, organising, leading and controlling the material, financial and human resources of an organisation.
To be effective, the management process requires a combination of forward planning, clear communication and efficient execution.
What are the four management actions?
Planning, Organising, Leading and Controlling
Describe the management action Planning
A continuous and repetitive process made up of many different phases. The usual result of this process is an agreed general plan covering the use of physical resources, the allocation of responsibilities, timetables and budgets, with the aim of achieving clearly identified results.
Describe the management action Organising
Related to the planning process, organising material and human resources so that they are utilised to the full and help to achieve the aim of the business within the agreed time frame. Time frames will vary from short-term projects, lasting a few weeks, to strategic planning and organisation in the medium term, say over 3-5 years.
Good coordination is an important characteristic of successful managers, particularly since the execution of any management plan is likely to involve the aligned efforts of a number of different people.
Describe the management action Leading
Managers are expected to lead their team members. Some organisations have “flat” management structures (structures that are not hierarchical) but many use vertical structures. In the latter, management authority grows in tandem with seniority.
Accountability is an important aspect of leadership - the leader’s acceptance of responsibility for the actual performance of the organisation or department, its operations and profitability and the results of their own decisions. It is the manager’s role to give an account to stakeholders of how the organisation has performed.
Describe the management action Controlling
One of the manager’s roles is to monitor evaluate progress and there are several common methods of controlling management activities.
What are the three main business components?
Physical Resources, Financial Resources and Human Resources
Give some examples of physical resources in the context of business components
Office space, IT, telecoms, websites, motor vehicles etc.
