Czech Republic - Pilot assessment of governance of the insurance sector
Renee-Bakker, Marie; Rutledge, Sue; Lester, Rodney;
This insurance governance assessment is one of a series of pilot financial sector governance assessments prepared by the World Bank at the request of the Czech Government, which has taken the lead in supporting this work. The other assessments include those on the banking, collective investment fund and private pension fund sectors. This assessment is the first effort to employ the insurance template. The template has been further refined based on the experience with the Czech assessment and transmitted to the International Association of Insurance Supervisors (IAIS), which is planning to examine this topic. In essence corporate governance of insurers concerns the management of risk. Risk management requires that: (1) sufficient capital be retained by the business given the insurer's risks; and (2) the governance structure take into account the rights and interests of all stakeholders within the context of the way a particular country's institutions and financial infrastructure are organized. Key elements of insurance governance include the regulatory approach, the strength and approach of the supervisor, the role of the professions (actuaries and auditors), the legal structures and financing of institutions and the roles of boards and managements. A strong system will be characterized by: (a) appropriate risk management and risk-based capital requirements; (b) effective supervisory boards; (c) appropriate regulation including accounting standards; (d) corporate structures which inhibit the easy and non-transparent transfer of assets; (e) a risk-based supervisory approach; and (f) strong protection of policyholders, creditors and minorities in the event of corporate stress or insolvency.
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