1. Tan Beng Lee Group CEO Great Eastern Holdings Limited, Singapore Role of Independent Directors in Insurance Company 12 July 2005, Hong Kong

2. 1.SINGAPORE LISTED COMPANIES

3. Requirement for Independent Directors  Spelt out in Code of Corporate Governance  Not prescriptive. Code specifies best practices but allows deviations, with explanations  Must have effective Board comprising oPeople with diverse backgrounds, experiences and competencies oMore than one-third independent oNominating Committee to determine independence

4. Definition of Independent Directors  No legislative definition, only broad indications  Independent director - without any relationship with company to interfere with his independent judgment  Examples of relationships: oEmployed by company, currently or in last 3 years oImmediate family member employed by company, currently or in last 3 years oAccepting any compensation from company in current or last 3 years oConnected with company which made payments exceeding $200,000, or received payments exceeding $200,000, in current or immediate past year

5. Importance of Independent Directors  To safeguard interest of ALL stakeholders  To balance diverse interests of employees and shareholders, especially minority stakeholders  To increase long-term shareholder value, in the face of shareholder expectations for well-run and directed companies  To provide effective leadership to manage business risk and minimise fraud risk  To play important role in “watchdog” committees such as Audit, Nominating and Remuneration Committees

6. 2.INSURERS INCORPORATED IN SINGAPORE

7. Corporate Governance for Insurance Companies  MAS proposing Insurance (Corporate Governance) Regulations for all insurance companies incorporated in Singapore  Will be stricter and more onerous than Code for listed companies  Very prescriptive and specific In Code, one-third Board to be independent; Regulations require majority Stricter interpretation of “independent” director  No level-playing field for all insurer – insurers incorporated outside Singapore need not comply

8. Definition of Independent Directors  Definition clearly specified in the proposed MAS  3 main conditions  1 st & 2 nd conditions – should not be in any relationship with insurer and affiliates – same as Code  3 rd Condition – should not be substantial shareholder or connected to substantial shareholder, including being accustomed or under obligation to act according to substantial shareholder’s wishes  This 3 rd condition is new – not in the Code for listed companies

9. Importance of Independent Directors for Life Insurance Companies  In life insurance policy, perceived inherent conflict between shareholders and policyholders  Need to protect policyholders, especially in area of product liability

10. 3.THE CHALLENGES

11. Shortage of Truly Independent Directors  Need candidates from diverse backgrounds, qualifications, experience and capabilities  Shortage of directors with good grasp of actuarial knowledge and embedded value concepts to contribute effectively to Board‘s discussions  Need to be in touch with changes in life insurance industry…market conduct issues, risk management issues etc  Already difficult to get good candidates as directors, let alone good independent directors

12. Evaluation of Independence is Subjective  Even after they qualify based on “hard” criteria like qualifications and experience, is there true independence of mind and impartiality?  Can they lose independence with time, after the establishment of friendships, or after they become beholden in any way to substantial shareholder or management?  Board unlikely to appoint a candidate they are not comfortable with. Need to ensure a good fit

13. Importance of integrity  Important to observe Code in spirit, instead of blindly following it to the letter  Corporate culture is most important  Independence is a state of mind. It is important. But what is most important is the INTEGRITY of the individual to ensure that he maintains an independent mind when performing his duties as a director

14. THANK YOU