In the backdrop of yearly revenues of $4 trillion globally, the insurance sector in MENA region should further enhance the scope of corporate governance and risk management, a senior official at the Central Bank of Bahrain.
“The conditions are ripe for enhancing the role of corporate governance, regulatory and risk management priorities for the Middle East Insurance Industry,” said Abdul Rahman Al-Baker, Executive Director of Financial Institutions Supervision at the CBB.
He was speaking on the day two of the 7th Middle East Insurance Forum (MEIF) 2011.
“The insurance industry plays an important role globally, as it contributes to more than $4 trillion in worldwide revenue. In addition, the macroeconomic trends of the emerging markets like India, China, Russia, Brazil as well as the Middle East will continue to grow. As a result, the current demand for sound conduct of business and transparency, as well as the enhancement of policyholders and shareholders confidence make the need for strong corporate governance for insurance industry globally and in the Mena region are greater now than ever before,” he added.
“Corporate Governance provides the structure through which the objectives of the insurance company are set and the means of attaining those objectives and monitoring performance are clearly determined. Generally, effective corporate governance provides proper incentives for the board and management to pursue objectives that are in the best interest of the company and its shareholders and should facilitate effective monitoring.
“Obviously, the current financial crisis can be to an important extent attributed to failures and weaknesses in corporate governance. Therefore, regulators all over the worlds should consider the issue of corporate governance very seriously as the world is no position to face major, new shocks,” he said.
“Effective implementation of good corporate governance for insurance industry in the Mena region requires regulators, in their roles of monitoring and enforcement and insurance company boards of directors, in their role as implementers, ensuring that there must be a commitment to good corporate governance through a written policy approved by the board of insurance company. The corporate governance policy should be adhered to at all times and should be an evolving document that is periodically reviewed and updated to reflect any changes in the markets. Furthermore, standards of business conduct and ethical behavior code for the board, senior management and other personnel should be in place and strictly enforced,” he added.
He also stressed the need to have proper board of directors to run the affairs who have appropriate knowledge, skills, experience and integrity should be in place and operative.
“Proper remuneration policy and specialized committees should be in place to ensure proper operations of the company. The board should establish accountability for external audit function, compliance with laws and regulations; evaluating corporate risks; the actuarial functions; the internal audit functions, reinsurance treaties, and procedural manuals and controls. In addition, the board should allow for the direct access to it at all times, especially for officers like compliance and internal auditor,” he added.
“Overall, the board of directors should encourage further enhancement of public disclosure and transparency by ensuring that the company’s annual and interim reports include detailed, accurate and comprehensive information on the company’s financial position, as well as they are prepared in line with the International Financial Reporting Standards (IFSR).”
“Maintaining adequate level of solvency that is in line with the best regulatory standards is another regulatory priority for the regulators in the Middle East insurance industry. For sure, adequate solvency requirements will enhance the confidence in the financial stability of the insurance industry and further improve the financial standing of insurance firms,” he added.