Violation of code of corporate governance: Insurance company to be fined up to Rs1m
ISLAMABAD: The insurance company, which violates the Code of Corporate Governance for Insurers, 2016, may be subjected to a heavy fine up to Rs 1 million.
The SECP has issued SRO 1085 (I)/2020 to introduce the draft amendments to the Code of Corporate Governance for Insurers, 2016, here on Wednesday. According to the amended Code of Corporate Governance for Insurers, 2016, the SECP has said that any failure on part of any insurer to comply with the requirements of the code is punishable under Section 156 of the Insurance Ordinance, 2000.
Under Section 156 of the Insurance Ordinance, any insurer who makes default in complying with or acts in contravention of any requirement of this Ordinance, [or any direction made by the Commission, the Commission shall have the power to impose fine on the insurer and, where the insurer is a company, any director, or other officer of the company, who is knowingly a party to the default, shall be punishable with fine which may extend to one million rupees and, in the case of a continuing default, with an additional fine which may extend to Rs10,000 for every day during which the default continues, the SECP added.
Under the revised regulations, the internal audit function, wholly or partially, may be outsourced by the insurer to a professional services firm and in lieu of outsourcing, the insurer shall appoint or designate a full-time employee other than chief financial officer or an employee directly reporting to the chief financial officer, as head of internal audit holding equivalent qualification prescribed under this code, to act as coordinator between firm providing internal audit services and the Board: Provided that while outsourcing the function, the insurer shall not appoint its existing external auditors or any of its associated company or associated undertaking, as internal auditors.
The details of all related party transactions shall be placed periodically before the audit committee of the company and upon recommendations of the audit committee, the same shall be placed before the board for review and approval.
Provided where majority of the directors are interested in such transactions, the matter shall be placed before the general meeting for approval.
Provided further that in case of an insurer, where general meeting is not required to be held, and the majority of directors are interested in related party transactions, the matter shall be placed before the administrative authority of such insurer, the SECP said.
The SECP has further directed that insurers are encouraged to ensure that by December 31, 2021 at least half of the directors on their Boards; by December 31, 2022 at least 75 percent of the directors on their Boards and by December 31, 2023 all the directors on their Boards have acquired the prescribed certification under any director training program offered by institutions, local or foreign, that meet the criteria specified by the Commission and approved by it.
A newly-appointed director on the Board may acquire, the directors training program certification within a period of one year from the date of appointment as a director on the board: Provided that director having a minimum of 14 years of education and 15 years of experience on the Board(s) of insurer(s) shall be exempt from the directors training program; Provided further that a director who is exempted under the requirements of Listed Companies (Code of Corporate Governance) Regulations, 2019, shall also be exempted from the requirements of directors training program under this code.
The insurers are also encouraged to arrange training for at least one female executive every year under the directors’ training programme from year December 2021, and at least one head of department every year under the directors’ training programme from year December 2022, the SECP added.
Copyright Business Recorder, 2020