Do senior managers have to meet fit and proper requirements and/or be approved?
Insurance & Reinsurance
The Central Bank the power to designate certain positions within a regulated firm as being Pre-approval Controlled Functions (“PCFs”). The approval of the Central Bank must be sought prior to appointing a person to act as a PCF. In summary, a PCF is a function through which a person may exercise a significant influence on the conduct of a regulated financial service provider’s affairs. Therefore, as part of the Central Bank’s Fitness and Probity regime, all proposed directors and senior management will have to apply to the Central Bank for prior approval.
In order to comply with the Central Bank’s Fitness and Probity standards a person is required
- competent and capable;
- honest, ethical and act with integrity; and
- financially sound.
For the purposes of considering whether or not to approve a person to carry on a PCF, the Central Bank has a broad range of powers and in particular may request that the person or an individual on behalf of the undertaking provide certain specified information to it. The person may also be required to attend before a specified officer or employee of the Central Bank for an interview. This is to ensure that the undertaking has the necessary people, skills, processes and structures to successfully manage its insurance or reinsurance business. This includes, in particular, close scrutiny of the undertaking’s management structures, board and senior management appointments, key committees and key statutory roles.
FSMA requires that individuals in certain ‘controlled’ functions must be approved by the regulators. Certain roles in the business are therefore either classified as Senior Insurance Management Functions (the list of functions identified by the PRA) or Approved Persons (the list of functions identified by the FCA). It is possible for an individual in a PRA function to also require approval for one of the FCA functions. For example, the Chief Executive Senior Insurance Management Function will also fall within the Director function. Before taking up any controlled function an application must be made to the relevant regulator for approval. Both the PRA and FCA will seek to ensure that the individual is fit and proper for the role. They will consider the individual’s honesty, integrity and reputation as well as their competence and capability and financial soundness.
Solvency II requires that individuals in key functions within the business are fit and proper for their roles. This requirement exists alongside the Senior Insurance Management Functions and Approved Persons. Key function holders include all “persons who effectively run the undertaking” and those in “other key functions”, likely to include the board and senior management and other individuals who lead significant business units.
Certain persons in senior management have to meet fit and proper requirements. This means that an insurance company under the FSA’s supervision shall notify the FSA, which then will assess the person’s experience, knowledge and reputation, when any of the following persons are appointed or changed:
- chairman of the board or his/her representative,
- members and alternate members of the board,
- the CEO or his/her representative, and
- the manager responsible for central functions (risk management, compliance, internal audit and the actuarial function).
The German Insurance Supervision Act requires that the individuals responsible for certain key functions (Schlüsselfunktionen) must be notified to BaFin to ensure that the individual is fit and proper for the role.
“Fit and proper" requirements apply to the CEO of an insurance company, to any other factual leader, and to the board of directors. In addition, owners of qualified holdings of the company's shares or votes must be fit and proper to own such holdings (see question 5).
“Fit and proper” requirements also apply to the CEO and any factual leader of an insurance intermediary, and for any broker or insurance agent who practices through an intermediary entity.
According to Article 58 of the LISF, senior managers must be persons with a good credit record and honorability, and meet the following requirements:
- Be residents in Mexican territory in terms of the provisions of the Federal Tax Code;
- Have served for at least five years in high-level decision-making positions, Performance requires knowledge and experience in financial, legal or administrative matters;
- Not fall under any of the impediments to act as advisers listed in article 56 of the LISF;
- Not perform functions as regulator of insurance companies.
The IA does require that the senior officers of its licensees meet certain requirements, as per Article 32 of the Insurance Law and IA Resolution 2 of 2009. For insurers, this includes the General Manager who must meet set educational and experiential requirements. As per this Resolution, various “key employees” must also be qualified, but the regulation does not set out these specifics at length; the IA license application and renewal process does however, require submission of the credentials of the “management team” for each separate line of business, which will be scrutinized by the IA.
The relevant controlling regulations also specify that a TPA must have its senior manager, professional medical officer, and consulting doctor meet specified educational and experiential levels. Likewise, brokers must appoint employees and technical staff qualified to perform their functions. There are also set requirements for agents, actuaries, and loss adjusters.
The regulations require differing levels of staffing for each type of insurance business. For example, pursuant to IA Resolution No. 15 of 2013, as amended, a brokerage must have at least the following staffing levels: General Manager (or CEO), Operations Manager, Internal Auditor (Controller), and a specialized professional for each type of insurance the broker handles. These positions may not be combined into one role; each role must be held by a separate individual on a full time basis. Furthermore, each of these persons must meet strict educational and experiential requirements, which generally consist of a University Degree or equivalent educational credentials depending on the role, and a minimal set amount of practical experience, again varying depending on the specific role and whether or not the person is a UAE national.
All such licensees must also meet standards of good conduct and may be required to submit a good conduct letter from the relevant Emirate’s law enforcement body to demonstrate the absence of any impediment.
Demonstrating the proper educational and experiential requirements is often a time consuming task, especially for those employees who are not UAE nationals. The employee must first obtain a Certificate of Equivalence from the Ministry of Higher Education, and the Ministry of Education as well for certain educational degrees, demonstrating that the foreign educational qualifications meet the requisite standards. These documents must be attested from their source through the level of the UAE Embassy in the foreign jurisdiction where such were initially granted, and then stamped by the UAE Ministry of Foreign Affairs. Only at the point that the Certificate of Equivalence is issued by the Ministry of Higher Education can the educational credentials be submitted to the IA for their approval. Likewise, the IA requires submission of Certificates of Experience demonstrating the employees’ practical experience, which will require attestation if issued by a foreign source.
As noted above, in connection with the formation of a new insurer or a change of control, proposed officers and directors must be approved by the insurer’s domestic state regulator after successfully passing financial, professional and criminal background investigations.
Yes, pursuant to Article 120 VAG, managing directors and key personnel are required to meet fit and proper requirements. In particular, insurance and reinsurance undertakings need to ensure that all persons who effectively run the undertaking have adequate professional qualifications, knowledge and experience to enable sound and prudent management (fit) and are of good repute and integrity (proper).
At least two managing directors are required to have sufficient theoretical and practical knowledge in the insurance sector as well as general management experience. As a general rule, these criteria will be met if a person has a minimum of three years of management experience in an insurance undertaking of a comparable size and business sector. On top of this, at least one member of the board of directors must be fluent in German.
Insurance and reinsurance undertakings shall notify the FMA of any intention to appoint or change key personnel together with all information needed to assess whether any new persons appointed to manage the undertaking are fit and proper. With regards to members of the board of directors, the FMA has to be notified at least one month before the scheduled appointment and with regards to other key personnel immediately after appointment at the latest. The FMA is authorised to impede appointments.
Yes. Senior managers, along with their job description, must be reported by an insurance company to the Insurance Regulator. Any changes in this regard must be informed to the Insurance Regulator within 3 days as of such change.
Senior managers of an insurance company, reinsurance company, insurance broker or loss adjustor cannot be appointed as such if: (i) they have been sentenced for felony crimes or crimes under insurance regulations; (ii) are subject to liquidation and inability to perform commercial acts; and (iii) have been sanctioned by the Insurance Regulator. Further, insurance and reinsurance companies must submit their key officer resumes, including their professional and labor background, and evidencing the knowledge, skills and experience of the relevant individuals.
Senior management, i.e. the board of directors (Verwaltungsrat), the top management, and the appointed actuary have to ensure (by character and qualification) the flawless operation of the insurance company. Art 14, 23 para 2 ISA in connection with Art 12 et seqq ISO.
The eligibility of the senior management is assessed in the course of the licensing process, Art 4 para 2 lit g and h ISA (see no 4 above) and continuously monitored by FINMA. Changes in the senior management must be notified to FINMA (and in case of the appointed actuary, approved by it).
The administrative staff at managerial or executive level of insurance companies must comply with moral and technical criteria. In this sense, directors, managers and main officials (such as the heads of risk management areas) should have not have any negative management records or have been sanctioned administratively or criminally, as well as have not held any evidence of non-compliance regarding commercial, financial and tax payments or other acts involving dishonesty and/or willful misconduct. Moreover, they should have good references of their professionalism, which is related to the requirement to have an appropriate professional career for the position, that is to say, experience in specialized activities and/or directives related to their profession, in the financial system and/or academic specialization accredited with university degrees or postgraduate degrees.
All directors and key managerial personnel of insurers and insurance intermediaries are required to be compliant with the fit and proper criteria stipulated by the IRDAI under the respective regulations.
Only appointments of relevant persons having control or effective control of the insurer's activities is subject to supervision by MAS. These persons include a principal officer, director or chief executive officer of a registered insurer, a Certifying Actuary, a substantial shareholder, and the Singapore representative who is responsible for the activities of the insurer's local representative office.
The election of directors and officers of local insurers and reinsurers must be approved by SUSEP, which verifies the fulfillment of requirements of moral suitability and technical qualification.
The qualification requirements for directors are detailed in the Control Over Financial Services (Insurance) Regulations (the Board of Directors and its Committees), 2007. We will refer only to the main requirements set therein.
Every member of the board of directors must be a natural person who fulfils at least one of the following:
- holds an academic degree in one of the following: insurance, law, economy, accountancy, statistics, business management, actuary, international auditing or any other field approved by the Commissioner;
- is qualified to serve as an actuary or risk manager in an insurance company;
- has managerial experience as detailed in the regulations; or
- holds a licence as an accountant, pension adviser, investment adviser, portfolio manager or an insurance broker and has been engaged in such field for at least four years.
The Commissioner is entitled to approve the appointment of a qualified director even if he or she does not fulfil any of the above terms.
A person may not be appointed as a director for an insurance company if:
- his or her other business activities do not leave sufficient time to fulfil the duties of a director;
- he or she is an employee of the insurer;
- he or she serves as a director or officer of another institutional body, unless the Commissioner confirms that no conflict of interest exists; or
- he or she has been convicted of a criminal offence as listed in the regulations.
At least one-third of the board members shall be external directors who have no connection with the main shareholders. At least half of the external directors must have clear and proven expertise in the insurance field or three years’ experience as a CEO, or have held another senior officer’s position in a financial institution. In addition, at least half of the external directors must have expertise in accounting and finance.
Prior to the appointment of a director or officer of an insurance company, a notice must be sent to the Commissioner, who may object to the appointment within 60 days.
According to the Control Law, the Commissioner has the right to supervise the nomination of directors and officers of an Insurer. The insurance company must submit annually the list of their D&Os to the Commissioner, specifying the qualifications of such D&Os.
Yes, they do, as the “fit and proper” assessment is part of the prudential supervision carried out by the NBB. There are two assessment standards which are the most important: expertise and professional integrity (Article 40 of the Supervision Act). The circular letter of the NBB of 17 June 2013 provides additional details about the way in which the NBB interprets the “fit and proper” legal requirements.
The expertise (fitness) standard covers a number of areas, including appropriate knowledge and experience, skills, and professional behaviour. As far as professional integrity (property) is concerned, a distinction is made between the professional disqualification technique, which is an automatic mechanism (there is no room for appraisal by the NBB) and the wider-ranging assessment of professional integrity (to which, on the other hand, the NBB’s power of appraisal does apply).
The persons in charge of conducting an insurance/reinsurance company are controlled by the ACPR to determine their fitness and skills to manage an insurer or a reinsurer (i.e. similar to the “fit and proper” requirements). When an insurance/reinsurance company applies for a licence, it is required to give detailed information of the identity, background, professional qualification and experience and good repute (and clean criminal record) of the persons who will be in charge of conducting and managing the insurance/reinsurance company’s business.
There are no explicit requirements in the FIC as regards the nationality of the directors and officers of an insurance/reinsurance undertaking.
Any change in the insurance/reinsurance companies’ management must be approved by the ACPR.
There are also rules relating to the fitness and skills (and clean criminal record) of the persons who manage insurance intermediaries and of certain employees of insurance intermediaries.
OSFI expects (i) Boards of Canadian insurers to select managers who have the required expertise, skills, experience and perspectives, taking into consideration the insurer’s strategy, risk profile and overall operations, and (ii) foreign insurers to select a chief agent that is able to properly oversee the management of the foreign company branch, including matters of a corporate governance nature that relate to the branch, and who will be accountable for its operations. Candidates for such positions also have to undergo security checks prior to their confirmation.