Long Term Insurance Act, 1998 (Act No. 52 of 1998)Board NoticesNotice on Governance and Risk Management Framework for Insurers, 2014Part 5 : Internal Control System24. Risk management function |
| (1) | The risk management function must establish, implement and maintain appropriate mechanisms and activities (including a strategy and operational plan) to— |
| (a) | assist the board of directors and managing executives in carrying out their respective responsibilities, including by providing specialist analysis and performing risk reviews; |
| (b) | identify the risks the insurer faces; |
| (c) | assess, aggregate, monitor and assist in managing and otherwise addressing identified risks effectively; |
| (d) | gain and maintain an aggregated view of the risk profile of the insurer at an enterprise-wide and individual business unit level; |
| (e) | evaluate the internal and external risk environment on an on-going basis in order to identify and assess potential risks as early as possible; |
| (f) | consider risks arising from remuneration arrangements and incentive structures within the insurer and in respect of persons to whom activities have been outsourced; |
| (g) | conduct regular stress testing and scenario analyses, including in respect of outliers or matters with low probability but high potential impact; |
| (h) | regularly report to the managing executives, heads of control functions and the board of directors on the insurer's risk profile, and the details of the risk exposures facing the insurer and related mitigation actions, as appropriate; |
| (i) | document and report material changes affecting the insurer's risk management system to the board of directors to help ensure that the framework is maintained and improved; and |
| (j) | conduct regular assessments of the risk management function and the risk management system and implement or monitor the implementation of any needed improvements. |
| (2) | The risk management function must have access to and report to the board of directors or a committee of the board identified by the board of directors on— |
| (a) | the strategy of the risk management function; |
| (b) | the risk management function's operational plan, including specific annual or other periodic goals being pursued and the performance against such goals; |
| (c) | information on the risk management function's resources, including an analysis on the appropriateness of these resources; |
| (d) | an assessment of the insurer's risk profile and changes thereto; |
| (e) | where appropriate, an assessment of pre-defined risk limits; |
| (f) | where appropriate, risk management matters in relation to strategic affairs such as corporate strategy, mergers and acquisitions, and major projects and investments; and |
| (g) | an assessment of risk events and the identification of appropriate remedial actions. |
| (3) | The risk management function must promptly inform the board of directors of any circumstance that may have an adverse material effect on the risk management system of the insurer. |