1. Independent Non-Executive Directors –The Case for Hong Kong Insurers Office of the Commissioner of Insurance The Government of the Hong Kong Special Administrative Region http://www.info.gov.hk/oci/ Mr. Richard Yuen Commissioner of Insurance

2. http://www.info.gov.hk/oci/ 2 Introduction  Corporate governance recognized internationally  Standards issued by insurance regulators

3. http://www.info.gov.hk/oci/ 3 Introduction (cont’d)  Guidance Note on the Corporate Governance of Authorized Insurers Promulgated by the Insurance Authority (IA) in August 2002 Effective date: 1 September 2003 Requires appointment of INEDs

4. http://www.info.gov.hk/oci/ 4 Importance of Independent Non-Executive Directors (INEDs)  Provide independent and objective opinions  Assist the Board to make sound decisions  Help maintain appropriate checks and balances

5. http://www.info.gov.hk/oci/ 5 Requirements about INEDs  INEDs not less than one-fifth of the Board  INEDs must be fit and proper persons  INEDs should be individuals with sufficient calibre and breadth of experience

6. http://www.info.gov.hk/oci/ 6 Requirements about INEDs (cont’d)  INEDs should be free from any business or other relationships with the authorized insurer  At least one INED in the Audit Committee

7. http://www.info.gov.hk/oci/ 7 Requirements about INEDs (cont’d)  Circumstances in which a director is unlikely to be considered an INED:  Employee  Director of a company within the same group  Controller  Associate of director or controller  Person having significant financial association with the insurer

8. http://www.info.gov.hk/oci/ 8 Compliance Status  Authorized insurers in Hong Kong generally comply with the INED requirements Non-compliance Survey on Corporate Governance in Sept 2003 At least one-fifth of the Board composed of INEDs Authorized Insurers

9. http://www.info.gov.hk/oci/ 9 Background of INEDs

10. http://www.info.gov.hk/oci/ 10 Continuous Professional Development  Directors and INEDs to receive training  INEDs to make reference to relevant guidelines

11. http://www.info.gov.hk/oci/ 11 International Association of Insurance Supervisors (IAIS) - Missions  Enhance cooperation among insurance supervisors  Unite their efforts to develop practical standards  Provide assistance to safeguard the integrity of markets  Exchange information

12. http://www.info.gov.hk/oci/ 12 IAIS - Key Activities: Setting Global Insurance Standards  Capital adequacy and solvency  Accounting  Reinsurance  Transparency and disclosure

13. http://www.info.gov.hk/oci/ 13 IAIS – Observer Members  Exist since 1999  Insurance professionals  > 80 Observers  Receive draft IAIS standards and training materials for comment  Take part in IAIS working parties

14. http://www.info.gov.hk/oci/ 14 http://www.iaisweb.org International Association of Insurance Supervisors (IAIS)