Do senior managers have to meet fit and proper requirements and/or be approved?
Insurance & Reinsurance (3rd edition)
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 senior managers under PRC laws and regulations including general manager, deputy general managers, and assistant general managers of the head office; secretary for the board of directors, chief compliance officer, chief actuary, chief financial officer, and chief auditor of the head office; general manager, deputy general managers, and assistant general managers of a branch or a central sub-branch; manager of a sub-branch or a business department and any other executive who has the same power as any of the aforesaid senior executives.
The senior managers shall be approved by CBIRC. The senior managers shall be honest and trustworthy, have a good awareness of regulatory compliance in operations, and have the business management ability required for performing their respective functions. They are required to pass the examinations on insurance laws and regulations and related knowledge as recognized by CBIRC.
There are some other working experience, education background and procedural requirements for senior managers. For instance, the secretary for the board of directors of an insurance company shall have a university diploma at or above the undergraduate course level and have five or more years of work experience appropriate for performing his or her functions. For other detailed regulations, please see Provisions on the Administration of the Office Qualifications for the Directors, Supervisors and Senior Executives of Insurance Companies (2018 Amendment).
"Fit and proper" requirements apply to the CEO of an insurance company and to the members of the board. In addition, owners of qualified holdings of the company's share capital or votes must be fit and proper to own such holdings (we refer to reply to question 5, too).
The Danish FSA shall be notified of the fulfilment of the fit and proper requirements when a CEO or member of the board are appointed or changed.
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. ISA 14, 23 para 2 in connection with ISO 12 et seqq.
The eligibility of the senior management is assessed in the course of the licensing process, ISA 4 para 2 lit g and h (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).
Proposed amendments by Pre-Draft ISA (not exhaustive):
- The owners of a qualified holding (10% or more) will also have to meet the fit and proper criteria.
The ACGFC also regulates “Executive Officers” of an insurer. The specific qualification requirements of Executive Officers under the ACGFC include background requirements that the individual has not declared bankrupt and has not being sentenced to a suspension or imprisonment without labor or heavier punishment. Upon the appointment of an Executive Officer, an insurer shall publicly disclose the appointment of the Executive Officer and his/her qualifications on its website, company materials, etc. and shall report same the FSC.
An insurer shall appoint at least one (1) person to oversee its compliance with internal control standards, investigate violations of the standards, and take charge of general affairs related to internal control as a “Compliance Officer”. The Compliance Officer is appointed among inside directors or operational officers as an executive of the insurer. Furthermore, the same requirements shall similarly apply to the appointment, dismissal, term of office, etc. of a Risk Manager of an insurer.
Executive or senior staff must meet several moral and technical requirements. To this extent, directors, managers, and senior officials (such as the heads of risk management areas) may have no negative managerial records, or sanction, whether administrative or criminal. Likewise, there must be no evidence of their non-compliance with any commercial, financial or tax duty, or of whichever actions involving dishonesty and/or wilful misconduct. Moreover, they must hold good professional credentials satisfying the requirement for a professional career that is suitable for the position; that is to say, having carried out career-related specialized or managerial activities within the financial system, and/or having completed specialized training attested by a university or postgraduate degree.
Senior managers must meet fit and proper requirements, which take into account good repute, competency, required experience and the absence of any criminal records.
Insurance and reinsurance companies seeking licenses and already-licensed undertakings making changes to its senior management need to provide information to, and get approval from, the ACPR regarding the following individuals:
- any person who effectively runs the (re)insurance undertaking (i.e. CEO, deputy chief executive officers, and, when appropriate, the members of the board of directors), or
- any person responsible for key functions (such as risk management, internal auditing, compliance and actuarial services).
Since 2009, BaFin has been responsible for the supervision of the members of administrative and supervisory bodies. Over the years, BaFin has provided a number of guidance notices on "fit and proper"-requirements in order to assist insurers with the various requirements they have to meet. In accordance with the German Audit Reform Act, for example, insurers within the scope of Solvency II must ensure that when appointing members of the supervisory board, at least one member has professional knowledge of accounting or the audit of financial statements. Additionally, the members of the supervisory board as a whole must be familiar with the industry in which the company operates. To this end, the members of the supervisory board must demonstrate that they have sufficient basic knowledge of the insurance sector, the extent of which is based on the undertaking's individual risk profile, pursuant to the principle of proportionality.
The qualification requirements for directors are detailed in the Control Law Regulations (the Board of Directors and its Committees), 2007. The main requirements are:
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 fulfill 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 must 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.
APRA's Prudential Standard CPS 520 requires that a responsible person of a general or life insurer (which includes directors, senior managers and employees who perform activities for a subsidiary that may materially affect the insurer's financial standing) must satisfy a "fit and proper" person test. This test requires responsible persons to possess the competence, character, diligence and judgment necessary for them to perform their duties. The test also requires the person not to be the subject of a disqualification order and not have a conflict which would create a material risk of failing to perform their duties. For foreign insurers operating a branch in Australia, these requirements only apply to those managers who are ordinarily resident in Australia. The insurer must maintain a "fit and proper" person policy which outlines the process used by the insurer to assess whether a responsible person satisfies the test.
While reviewing the application for an authorization IVASS performs a limited background investigation on the officers and directors the new company to ensure that they all meet the applicable legal requirements. Notably directors, officers, statutory auditors and general directors must all meet the prescribed requirements of probity, independence and trustworthiness according to the relevant Civil Code provisions, of Article 4 of Ministerial Decree n.186/1997 and Ministerial Decree n.162/2000, to ensure sound and prudent management of the insurance or reinsurance company. Article 36 of Decree-Law n. 201 of 6 December 2011 addressed the issue of ‘interlocking directorates’, introducing the prohibition for an individual to be member of two or more boards of insurance companies, financial institutions or banks; that too is controlled by IVASS.
Article 8-2 of the Insurance Business Act requires directors who are engaged in the business of running an insurance company to have the knowledge and experience to appropriately, fairly, and efficiently manage such business and to have adequate social trust (“Fit and Proper Principle”). These matters are dealt in more detail in the Guidelines.
The Insurance Law provides for specific fit and proper requirements for management board members and senior managers (so-called "key managers"). The KNF approves the appointment of two members of the management board of an insurance company - the president thereof and the member responsible for risk management.
At least half of the management board members, including both of the management board members approved by the KNF must demonstrate their knowledge of the Polish language.
All management board members as well as key managers must meet specific education requirements and have no criminal record.
At least half of the management board members, including both of the management board members approved by the KNF as well as all key managers must have relevant experience necessary to perform their functions.
In matters of management and direction of insurance companies, the special rules of administration contemplated in Law 18,046 on Corporations (hereinafter LSA ) are applied. Thus, in the case of the Company's directors, the disability rules of articles 35 and 36 of the LSA apply, in addition to the special disability of article 44bis of DFL 251. Directors are subject to the fiduciary duties established by Law 18,046 and the responsibility derived from the non-compliance of these duties. In the case of directors and executives of insurance companies, Article 50 of DFL 251 provides for a special liability regime - joint and several liability with own property - in the case of operations prohibited by law.
Both the second paragraph of Article 50 of DFL 251 and Article 50 of Law 18,046 unify the regime of liability of directors and managers of a Company.
According to Article 58 of the LISF, senior managers must be persons with a good credit record and honorability, and meet the following requirements:
I. Be residents in Mexican territory in terms of the provisions of the Federal Tax Code;
II. Have served for at least five years in high-level decision-making positions, Performance requires knowledge and experience in financial, legal or administrative matters;
III. Not fall under any of the impediments to act as advisers listed in article 56 of the LISF; and
IV. Not perform functions as regulator of insurance companies.
Senior managers of UK (re)insurers are subject to fitness and propriety requirements under the Senior Managers and Certification regime ("SMCR") as well as under the FCA's Conduct Rules.
The SMCR has applied to insurers from 10 December 2018, replacing the previous PRA Senior Insurance Managers regime ("SIMR") and FCA Approved Persons regime. The SMCR will be extended to apply to further firms including insurance intermediaries from 9 December 2019. Fundamentally this regime aims to increase the individual accountability of senior managers in regulated firms whilst also making firms in most cases, rather than regulators, primarily responsible for assessing and ensuring the fitness and propriety of individuals who carry out certain controlled functions.
Under the SMCR certain executive and non-executive roles are designated 'Senior Management Functions' ("SMFs"). Appointment of an individual to an SMF requires pre-approval from the relevant regulator. Before taking up any SMF an application must be made to the relevant regulator for approval. The PRA and/or 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, capability and financial soundness.
In addition to the SMFs, certain other additional responsibilities prescribed by the FCA need to be allocated amongst the firm's senior managers ("SMs"). Each SM's individual responsibilities must be set out in a 'statement of responsibilities' which must be submitted to the regulators. Each SM so identified has a duty to take reasonable steps to avoid the firm breaching its relevant regulatory duties. A regulator may take individual action against an SM who fails to take such steps.
Firms are also required to prepare and maintain a 'responsibilities map' setting out the key roles in the firm, the people responsible for them and lines of accountability.
The certification regime requires insurers to identify individuals performing certain 'certification functions', which are functions which relate to a firm's regulated activities and involve or might involve a risk of significant harm to the firm or its customers. Firms must assess and certify each relevant individual's fitness and propriety to perform that role at least annually.
Firms must also ensure that employees comply with certain "Conduct Rules" issued by the FCA. There are two tiers of Conduct Rules: the first tier applies to all employees and directors of a firm involved in carrying out its regulated and unregulated financial services activities; the second tier applies to senior managers. Each firm has notification, training and record keeping obligations in connection with these Conduct Rules.
As per article 5 of IA Board Resolution No. 15 of 2013, the IA must approve individuals working as technical staff such as Chief Executive Officers, General Managers and Operations Managers. Such technical staff must have no criminal record and never have been the subject of bankruptcy proceedings.
Further, article 3(12) of Board Resolution No. 3 of 2010 makes provisions for an insurer regulated by the IA to circulate the Instructions concerning the Code of Conduct and Ethics to be observed by Insurance Companies operating in the UAE to its employees, as well as develop internal professional codes of conduct for the company and its employees.
Yes. Senior managers must be natural persons meeting fit and proper requirements. These requirements are set out, among others, in NBB’s Circular 2018_25 on the fitness of directors, members of the management committee, persons responsible for independent control functions and senior managers of financial institutions.
Prior to approval of a manager’s appointment, the NBB will review whether the person meets fit and proper requirements. The NBB may decide that a positive decision is subject to recommendations, conditions or obligations. Conditions may include the completion of specialised training, the divestiture of an external directorship or other function or a probationary period at the end of which the NBB may decide whether or not to confirm its initial approval. It may also impose certain obligations, such as regular reports on on-going judicial proceedings, improvements in conflicts of interest policies or in “collective suitability”. The NBB can require continuous monitoring of compliance with such recommendations, conditions or obligations and, if necessary, may assess.
Most states require that directors, executive officers, and owners of 10% or more of the voting securities of insurance companies submit certain biographical information, pass criminal background checks, and be approved by the state insurance regulator.
OJK Circular Letter 31/SEOJK.05/2016 on the Fit and Proper Test for Primary Parties of Non-Bank Financial Services Institutions provides that the following parties must pass a fit and proper test:
(a) controllers (as explained in our response to question 5); and
(b) directors, commissioners, pension fund executors, members of a sharia supervisory board, internal auditors and company actuaries.
Per the IRDAI (Re-insurance) Regulations 2018, no Indian insurer transacting life insurance business shall, without the prior approval of the IRDAI have re-insurance arrangements with its promoter company or its associate or group companies except on terms which are commercially competitive, and on an arm’s length basis.
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.
A director, manager, authorised person or consultant of an insurance company must be qualified under the LIA and NLIA. For example, they must hold a bachelor's degree or higher qualification or have work experience in relation to the insurance business, and must not be a director, manager, or authorised person of another company licenced to undertake the same life or non-life insurance business (as the case may be).
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. In addition, 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 such persons comply with the fit and proper requirements. 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 respect to other key personnel, immediately after appointment. The FMA is authorised to impede appointments.
Pursuant to its Fitness and Probity regime, the Central Bank has the power to designate certain positions within a regulated firm as being Pre-approval Controlled Functions (“PCFs”). 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. The main implication is that a person in a PCF role needs to comply on an ongoing basis with the Fitness and Probity Standards issued by the Central Bank. The PCF will need to confirm this in writing annually. Also, there is an obligation on PCFs to inform the Central Bank of breaches of financial services law which may be of interest to the Central Bank – this obligation is set out in the Central Bank (Supervision and Enforcement) Act 2013.
The approval of the Central Bank must be sought prior to appointing a person to act as a PCF. 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 to be:
- competent and capable;
- honest, ethical and act with integrity; and
- financially sound.
The Central Bank has a broad range of powers for the purposes of considering whether or not to approve a person to carry on a PCF and may request that the person or an individual on behalf of the undertaking provide certain specified information to it. An applicant for a PCF role can be required to attend before a specified officer or employee of the Central Bank for an interview.
The Central Bank will be concerned with ensuring that a (re)insurer has the necessary people, skills, processes and structures to successfully manage its business. The Central Bank will typically undertake a detailed review of a (re)insurer’s management structures, board and senior management appointments, key committees and key statutory roles.
Aligned with the Central Bank’s Fitness and Probity regime is its Minimum Competency Code 2017 (the “MCC”). The MCC specifies certain minimum competency standards with which persons falling within its scope must comply when performing controlled functions and/or providing certain financial services, in particular when dealing with consumers. Part 3 of the MCC sets out details on the recognition of qualifications in respect of retail financial products for the purposes of the code. The aim is to ensure that consumers obtain a minimum acceptable level of competence from individuals acting for and on behalf of regulated firms in the provision of advice and information and associated activities in connection with retail financial products.
The Minimum Competency Regulations 2017 are associated with the MCC and impose certain obligations on regulated firms. Among these are requirements to:
- ensure ongoing compliance with the MCC including the requirement to hold internal annual reviews to ensure that employees hold the right qualifications;
- maintain registers of accredited persons;
- ensure that the manner in which product selection processes, information and advice are presented to customers purchasing services and products via online platforms are approved in writing by a person who meets specific standards;
- supervise new entrants and maintain records in respect of those new entrants;
- provide statements of grandfathered status to grandfathered individuals who leave the firm;
- set out conditions that must be satisfied when a prescribed script function is performed on behalf of a regulated firm; and
- maintain records.