One of the main aspects of effective and efficient corporate governance is diligence and constant monitoring of the processes, activities and performance of the areas and partners when meeting the goals and strategies of the Insurance and Bonding Institutions, as well as compliance with the internal/external applicable regulations.
At Mazars, we understand the importance of the roles and responsibilities of the Audit Committee which are essential to evaluate the fulfillment of their responsibility in order to manage in a healthy and efficient way.
Article 72 of the Law of Insurance and Bonding Institutions (LISF) - Audit Committee
The Law of Insurance and Bonding Institutions in its Article 69 states that the institutions must have an effective system of corporate governance (see newsflash of April 2013) to ensure sound and prudent management of its business, whose instrumentation and monitoring will be the responsibility of the Board of Directors.
Within the corporate governance system, several support committees for the Board of Directors should be considered. One of them should be the Audit Committee, which is referred to in the said Act in its Article 72, which states that institutions must have an Audit Committee, which will be the body responsible for overseeing the institution's adherence to internal standards defined by the Board of Directors, as well as compliance with applicable legal and administrative provisions.
Functions and responsibilities
The Audit Committee must follow up compliance with policies and general standards on corporate governance matters, adopted by the Management Council, regarding the following:
- Internal and external audit areas, internal comptroller, risk management, actuarial function, and third party services.
- Application of policies and standards in the matters of subscription, product design and risk transference.
- Rules to avoid conflict of interests
- Asset Investment policy
The Audit Committee should propose the following for approval of the Council Management:
- The internal Comptroller system
- The internal and external auditor designation of the Institution, as well as the actuarial auditor
- The actuary in charge of the dynamic solvency
- The independent expert in charge of advising on the efficacy of the internal model
- The regularization plan, conduct code, and accounting policies
As a part of its functions, it will have the following responsibilities:
- To approve the internal audit annual plan
- To evaluate the quality of the internal and external issued reports
- To overlook internal audit independence
- To review the application of the internal comptroller system with support of internal or external audit
- To inform the Management Council on the situation of the corporate government system, reporting deficiencies and deviations in risks, actuarial and internal control matters, as well as assessments on internal comptroller, internal and external audit functions performance.
- To inform on detected irregularities
- To evaluate objective and goals of the institution compliance
- To review regularization and auto corrective plans
According to the functions and responsibilities described above, the Audit Committee will be a key committee for the performance of Corporate governance, and for the Management Council, and it should be structured in order to respond adequately in order to ensure the correct performance of the areas, taking care of any contingency that could have repercussions in its functions and responsibilities.
Therefore, the performance of the Institution with a risk culture and self assessment, will be essential in order to reduce the risk of the Audit committee not detecting not covered risks in the performance of its functions and responsibilities
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.