Long Term Insurance Act, 1998 (Act No. 52 of 1998)Board NoticesNotice on Governance and Risk Management Framework for Insurers, 2014Part 3 : Composition, Governance and Structure of the Board of DirectorsBoard of Directors3. Composition and governance of board of directors |
| (1) | For purposes of this section1,— |
| (a) | a non-executive director means an individual who is not involved in the day-to-day management of the insurer or has not been so involved at any time during the last 12 months; and |
| (b) | an independent director— |
| (i) | means a non-executive director that— |
| (aa) | is not and has not in the past three years been an employee of the insurer or any of its related or inter-related persons (as defined in section 1 of the Companies Act); |
| (bb) | is not a member of the immediate family of an individual mentioned in subparagraph (aa); or |
| (cc) | is not a material supplier or customer of the insurer, such that a reasonable and informed third party would conclude in the circumstances that the integrity, impartiality or objectivity of that director is compromised by that relationship; and |
| (ii) | includes a director of the direct or indirect holding company of the insurer that meets the requirements set out in paragraph (i) in respect of that holding company. |
(2)
| (a) | The board of directors of an insurer must at all times consist of— |
| (i) | a sufficient number of non-executive directors and independent directors to promote objectivity in decision-making by the board of directors; and |
| (ii) | an appropriate number and mix of individuals to ensure that there is an overall adequate spread and level of knowledge, skills and expertise at board level commensurate with the nature, scale and complexity of the business and risks of the insurer; |
| (b) | If paragraph (a) is not complied with, the board of directors must notify the Authority of the composition of the board of directors and motivate to the Authority why the composition of the board of directors does not undermine the effectiveness of the insurer's governance framework. |
(3)
| (a) | The chairperson of the board of directors of an insurer must be an independent director. |
| (b) | If subsection (a) is not complied with, the board of directors must— |
| (i) | appoint a lead independent director; and |
| (ii) | notify the Authority of the non-compliance with paragraph (a) and motivate to the Authority why the non-compliance does not undermine the effectiveness of the insurer's governance framework. |
| (4) | The functions of the lead independent director are to, amongst others,— |
| (a) | provide leadership and advice to the board of directors in respect of matters where the chairperson has a conflict of interest or perceived conflict of interest, including by identifying circumstances where the chairperson may have a conflict of interest or perceived conflict of interest that may impact on the chairperson's independent decision making; |
| (b) | preside at meetings of the board of directors from which the chairperson is absent or in respect of which the chairperson has a conflict of interest or perceived conflict of interest; and |
| (c) | perform the functions of the chairperson that cannot be performed by the latter because of a conflict of interest or perceived conflict of interest. |
| (5) | Despite subsections (2) and (3), the Authority to ensure the prudent management of the insurer's insurance business and protection of the interests of policyholders may direct the insurer to— |
| (a) | change the composition of the board of directors; |
| (b) | appoint another person as independent chairperson; or |
| (c) | appoint another person as lead independent director. |
| (6) | The board of directors of an insurer must— |
| (a) | have appropriate internal governance practices and procedures to support its work in a manner that promotes efficient, objective and independent judgment and decision-making; |
| (b) | have adequate powers and resources to discharge its duties fully and effectively; and |
| (c) | adopt and implement a procedure to review, at least annually, its performance collectively, and that of each director individually. |
| 1 | These requirements are based on the requirements for members of audit committees as set out in the Companies Act. |