6. Without prejudice to the provisions of article (1) of the Implementing Regulations of the Law on Supervision of Cooperative Insurance Companies issued by decision of H.E. the Minister of Finance No. 1/596 dated 01/03/1425H, the following terms and expressions wherever mentioned in this Regulation shall have the meanings shown assigned thereto unless the context requires otherwise:

   Central Bank: The Saudi Central Bank*.
   Board of Directors (the Board): the Company's Board of Directors as accepted by the laws in the Kingdom of Saudi Arabia.

   Chairman of the Board (Chairman): a Non-executive Board Member elected by the Board to preside over its meetings and organize its activities.

   Chief Executive Officer (CEO): the officer with highest rank in the senior executive management of the Company, who is in charge of its daily management, regardless of the title of his or her position.

   Company (Companies): the insurance and/or reinsurance company licensed by Saudi Central Bank under the Law of Supervision of Cooperative Insurance companies and its Implementing Regulations (or the insurance service provider required by Saudi Central Bank to comply with some, or all of the requirements of this Regulation based on Article (3) of this Regulation).

   Related Company: a company (or one of several companies that Saudi Central Bank may consider to be acting in concert) holding a shareholding of 5% or more of the equity of the Company, or a company in which the Company (either alone or with other companies that Saudi Central Bank may consider to be acting in concert) holds a shareholding of 5% or more.

   Related Persons: close family members of parents, spouse, descendants; any person with a business relationship that might influence the decision making process; and any establishment in which any member of the Board of Directors has more than 5% interest.
    

   Significant Shareholders: natural or legal persons that, directly or indirectly, alone or in association, controls 5% or more of the Company's shareholding.

   Executive Board Member: a member of the Board of Directors who is also a member of the executive management of the company and participates in the daily affairs of the company and earns a monthly salary in return thereof.

   Non-executive Board Member: a member of the Board who provides opinions and technical advice and is not involved in any way in the management of the company and does not receive a monthly or an annual salary.

   Independent Board Member: a member of the Board who enjoys complete independence. This means that the member is fully independent from management and the company. Independence is the ability to judge things after taking into account all relevant information without undue influence from management or from other external entities.

   Independence cannot be attained by a Board member in the following situations, including but not limited to:

   1. Being a Significant Shareholder in the Company, or in a Related Company, working for or representing a Significant Shareholder
   2. Being a member of the Board in a Related Company or one of its subsidiaries, or having been one during the past two years
       
   3. Being a member of the Board of the Company for more than nine years
   4. Holding a Senior Management position in the Company, or in a Related Company, or having held one during the past two years
   5. Being an employee with the Company, with a Related Company, or with a company that provides services to the Company (e.g., external auditors, consulting firms, etc.) or having worked with any one of the above during the past two (2) years
   6. Being a Related Person of a member of the Board or Senior Management of the Company or of a Related Company
   7. Having a contractual or business relationship with the Company (either directly or through an entity in which he or she is a Significant Shareholder, a Board member, or a manager) which resulted in paying to, or receiving from, the Company the equivalent of two hundred and fifty thousand (250,000) Saudi riyal or more (other than his or her remuneration as a director of the Board and amounts related to insurance contracts) during the past two (2) years
   8. Being under any financial obligation towards the Company or any members of its Board or Senior Management that might limit the exercise of independence in judgment and decision making
       

   Senior Management (Management): the Managing Director, Chief Executive Officer, General Manager, their deputies, Chief Financial Officer, Managers of key departments, officers of risk management, internal audit, and compliance functions, and similar positions in the Financial Institution, in addition to incumbents of any other positions determined by Saudi Central Bank.

   Senior Positions: Members of the board and senior management.

   Stakeholders: the persons or parties who have an interest in the company, including shareholders, policyholders, claimants, employees, reinsurers, regulatory and supervisory bodies.

   The rest of the words and statements used in this Regulation shall have the same meaning as per Article (1) of the Implementing Regulations of the Law on Supervision of Cooperative Insurance Companies unless the context requires otherwise.

* The Saudi Arabian Monetary Agency was replaced by the name of Saudi Central Bank in accordance with The Saudi Central Bank Law No. (M/36), dated 11/04/1442H, corresponding in 26/11/2020AD.

7.Companies must establish appropriate internal controls and procedures to ensure and monitor compliance with this Regulation and any related laws and regulations. In case the company contracts with other parties, it must ensure the compliance of all contracted parties with the provisions of this Regulation and any related laws and regulations.
 

8.Companies must maintain adequate records to demonstrate compliance with this Regulation and with any related laws and regulations, including but not limited to the Company's code of corporate governance, remuneration policy, code of ethics, disclosure policies and procedures, terms of reference for the Board and its committees, organizational charts, charters of control functions, detailed job descriptions of managers, minutes of the meeting of the Board of Directors and its committees, minutes of the general assembly meetings, and internal and external Board communications.

14. The governance structure of the Company should reflect the accountability of the Senior Management to the Board and the accountability of the Board to the shareholders and other Stakeholders, through relevant internal systems and policies.
15. The Board of Directors is ultimately accountable and responsible for the performance, conduct, and regulatory compliance of the Company. Delegating authority to Board committees or Senior Management shall not absolve the Board of its responsibilities. Furthermore, the Board is responsible for the performance of third parties engaged to perform jobs or manage functions.

16. The Board shall lay down written formal policies and procedures for disclosure, specifying, at minimum, the types of information to be disclosed, means and frequency of disclosing information, and the process to ensure the quality, adequacy, and timeliness of disclosure, in accordance with the requirements of applicable laws and regulations.

17. The Board is responsible for ensuring an appropriate level of transparency and timely and adequate disclosure of material events relating to the Company's financial situation and performance, risk exposures and risk management, and corporate governance.

18. The Company shall ensure that the disclosed information is comprehensive, meaningful, relevant, timely, consistent, reliable, and accessible by public without undue expense or delay.

19. The Board shall provide the general assembly with a report containing comprehensive and objective assessment of the Company's situation and performance, at least on an annual basis, including but not limited to the following:

a) Analytical review of the Company's financial performance during the last period

b) Key decisions made and their impact on the Company's performance and position

c) Assessment of the Company's strategy and financial position
 Names of any joint stock company(ies) in which a member of the

d) Company's Board is a board member

e) Any punishment, preventive restriction or penalty imposed on the company by any judiciary, supervisory or regulatory body

f) Any punishment, preventive restriction or penalty imposed on any board member by any judiciary, supervisory or regulatory body if it is related to the company

a) Assessment of potential risks and how such risks are being managed

b) Projections of future performance

20. In addition to any other applicable disclosure requirements by Saudi Central Bank or other regulatory bodies, the Company's annual report shall include the following information (regardless of order):

i) For the Board: functions, composition, names of the chairman and vice-chairman, dates of current term start and end, number of Nonexecutive Independent Board Members, number of meetings held during the period, date and attendance of each meeting, and details of remuneration for each of the Board members

j) For each Board member: name, classification (Executive, Non-Executive, or Independent), other companies in which he or she acts as a Board member, represented entity (if applicable), other positions held within the Company (if applicable)
 

k) For each Board committee: name of the committee, its functions, its members (classified as Chairman, Executive Board Member, Nonexecutive Non-independent Board Member, Non-executive Independent Board member, or non-Board member), number of meetings held during the period, date and attendance of each meeting, members’ remuneration for serving in the committee

l) Profiles of members of senior management (including name, position, qualifications, and experience of each senior manager)

m) Total compensation and remuneration paid to the Board members, five highest-paid members of Senior Management (the executive chairman and the financial director if they are among those highest paid members) during the period (divided into salaries, allowances, bonuses, and any other components), in addition to a description of any performance-linked incentives available for members of Senior Management

n) Ownership in the Company (direct and indirect) by Board members and members of Senior Management, and any changes of their ownership over the last year as listed in the approved shareholders' register.

o) Descriptions of transactions with any related parties, including Significant Shareholders and members of the Board and Senior Management, that took place during the period, and how such transactions are or were approved

p) Any potential cases of conflict of interest and how they were addressed

q) Names of all Significant Shareholders and their ownership in the Company

r) Results of the annual audit of the effectiveness and efficiency of the internal control system of the Company

s) Statement on the Company’s compliance with the requirements of this Regulation and with the Company’s code of corporate governance, along with the justification for any instances of noncompliance

21. The Company shall make available to its shareholders, and on the internet, its code of corporate governance and annual reports.

22. The Company shall not announce any anticipated actions that require Saudi Central Bank’s prior approval or non-objection, before obtaining the actual approval or non-objection, taking in consideration all related laws and regulations.

23. Members of the Board, Board committees, and Senior Management shall be trustworthy and shall have the integrity, competency, knowledge, and experience to fulfill their respective roles and shall comply with all laws, regulations, and rules issued by Saudi Central Bank at all times.
     
24. Significant Shareholders shall be of good conduct and reputation, financially sound, with no convictions related to committing any action involving moral dishonesty or contravention of laws in the Kingdom of Saudi Arabia or any other jurisdiction.
25. All appointments to senior positions including as members of the Board of Directors and its committees shall be made in accordance with Saudi Central Bank's Requirements for Appointments to Senior Positions in the Financial Institutions.
26. The nomination and remuneration policy followed by the Company shall have formal and rigorous standards and procedures to continuously monitor and assess the fitness and propriety of Board members, members of Board committees, members of Senior Management, in accordance with the requirements of Article (23) of this Regulation, and shall immediately notify Saudi Central Bank of any information or circumstances that may be relevant to assessment of fitness and propriety of these persons within a maximum period of (3) three business days from the day of obtaining the information or from the day of change occurrence.

27. The governance structure of the company shall support independent decision making throughout the organization by, for example, establishing clear separation of duties between the Board and the Management, enhancing the independence of control functions, and controlling the risk of conflict of interest.
     
28. The Board should leverage the services of independent external parties to provide assurance on the adequacy and effectiveness of the governance structure and processes of the Company and on other technical areas, where the Board might lack relevant expertise.

29. The Company shall take reasonable measures to identify cases of potential conflict of interest and have clear written procedures for dealing with those cases in a fair and transparent manner.
30. Members of the Board and Senior Management shall not have any interest, directly or indirectly, in the Company’s business and contracts, without a prior authorization from the general assembly, to be renewed each year. The activities to be performed through general bidding, where the member is the best bidder, shall constitute an exception to this rule, subject to Saudi Central Bank's non-objection. Members of the Board and Senior Management shall notify the Board of any personal interest they may have in the business and in contracts entered into by the Company. The notification shall be noted in the minutes of the Board meeting. Board members with a personal interest in specific Company’s businesses or contracts shall not vote, neither in the general assembly nor in the Board meeting, on the resolution to be adopted with regards to their personal interests. The Chairman of the Board shall notify the general assembly, when convened, of the activities and contracts
    where a member of the Board and Senior Management may have a personal interest and their amounts, and shall attach to such notification a special report prepared by the Company’s external auditors.
31. No member of the Board or Senior Management shall, without a prior authorization of the general assembly, to be renewed annually, participate in any activity which may likely compete with the activities of the Company, or trade in any branch of the activities carried out by the Company.

32. Members of the Board and Senior Management who own an interest in an Insurance Service Provider (e.g. brokers, agents, etc.) shall:

    1. disclose to the Board their interest in the insurance-related company, in writing, at the earliest opportunity
    2. never encourage or solicit dealings with the company in which they hold an interest
    3. refrain from voting in decisions related to dealings with the company in which they hold an interest

    Additionally, the Company shall notify the general assembly, when convened, of all businesses with any insurance-related company in which a member of the Board or Senior Management has an interest, and shall attach to such notification a special report prepared by the company's external auditors.
     

33. The Chairman shall provide the general assembly with details of insurance contracts in which members of the Board or Senior Management or their related parties have an interest, including the line of business, size, and associated losses, if any.

34. The Company’s articles of association shall specify the remuneration for the Chairman and Board members for their services. Board members remuneration can be modified only by the extraordinary general assembly.

35. The Board shall propose the remuneration package for the Board, based on the recommendations of the Nomination and Remuneration Committee, in accordance with applicable laws, regulations and rules and with the conditions set by the general assembly, subject to the approval by the general assembly.

    The Company shall ensure that all written details of the proposed remuneration and considerations are accessible to the Shareholders prior to the general assembly at which the remuneration and considerations shall be put to voting.

36. The Company shall have a remuneration policy, as per Article (11) of this Regulation, covering all levels and categories of employees, whether regular or contractual. The remuneration policy shall address the following at minimum:
    1. Objectives of the compensation scheme (with focus on promoting effective risk management and achieving financial soundness and stability of the Company)
    2. Structure of the compensation system (including key determinants of compensation, alignment of compensation with risk taking, etc.)
    3. Determinants of the mix of remuneration components (fixed and variable components; cash and noncash benefits, etc.)
    4. Linking compensation with performance
37. The Board shall be responsible to ensure that the compensation level and structure:
    1. are fair
    2. are aligned with the Company’s objectives
    3. encourage prudent behaviors and does not induce taking high risk transactions to achieve short-term profits, and it complies with the Company's risk management policy approved by the Board
    4. do not cause any conflict of interest that might negatively impact the Company’s performance
    5. achieve the interests of policyholders, shareholders and the Company’s long-term objectives
38. The Company shall have a performance measurement system in place to evaluate and measure the performance of its employees at various levels, in an objective and formal manner. The performance measurement of Senior Management, in particular, shall be based on the longer-term performance of the Company, and not based on only one year's performance.
     
39. The nomination and remuneration committee shall ensure that an annual remuneration review (internally through the internal audit function or externally commissioned by a specialized firm) is conducted independently of executive management.
40. The remuneration structure of employees working in control functions (such as internal audit, and compliance) shall be designed to ensure objectivity and independence of these functions. In this regard, it should be ensured that the executive management of the company is not intervening in the process of performance measurement and compensation determination of such employees.
41. Members of the Board and Senior Management (except sales managers) shall not receive any commission or rewards on sales-related activities (e.g. production). Furthermore, no variable component of the compensation for members of the Board and Senior Management (except for sales managers) shall be directly based on premium volume.

42.The Company shall provide shareholders with comprehensive, adequate, accurate, and timely information to enable them to exercise their rights efficiently, and ensure that all shareholders receive equitable treatment.

43.The company should enable shareholders to be briefed on the minutes of the General Assembly.

44.The Company shall take available procedures to encourage minority shareholders and non-institutional shareholders to fulfill their roles as shareholders of the Company.

45.Shareholders must be granted the opportunity to communicate their opinions and concerns to the Board and Senior Management on a regular basis (e.g. through the general assembly).

89. The Board shall establish specialized Board committees to extend its oversight into particular areas of the Company's activities, such as nomination and remuneration, audit, risk management, investment, regulatory compliance, disclosure, governance, human resource, strategic development, etc., and delegate the necessary powers to its committees and monitor their performance.
90. At a minimum, the Board shall establish an executive committee, an audit committee, a nomination and remuneration committee, a risk management committee, and an investment committee.
     
91. The Board of Directors shall approve the by-laws of all committees of the Board. Each committee should have general procedures laid down by the Board, specifying its functions, its duration, scope of its work, its powers and duties, and the mechanism through which the Board monitors its activities.
92. Board committees shall operate in a manner similar to that of the Board. In particular, Articles 68, 69, 70, 71, 74, 75, 86 and 87 of this Regulation shall apply to Board committees as they apply to the Board.
93. The Board shall carefully review the meeting minutes and recommendations of its committees.
94. The committees shall be able to seek external professional advice, when necessary, to perform its role, at the Company's expense, after obtaining the Board's approval.

125. The Appointed Actuary shall discharge his or her responsibilities as stipulated in Article (20) of the Implementing Regulations of the Law on Supervision of Cooperative Insurance Companies and in accordance with the requirements of the Actuarial Work Regulation for Insurance and Reinsurance Companies issued by Saudi Central Bank.
126. The code of corporate governance of the Company shall define the roles and responsibilities of the Appointed Actuary and the manner in which he or she discharges his or her responsibilities in accordance with the requirements of the Actuarial Work Regulation for Insurance and Reinsurance Companies issued by Saudi Central Bank and other applicable laws, regulations, and rules.

127. The Senior Management are responsible for supervising the day-to-day activities of the Company.

128. The code of corporate governance of the Company shall define the roles and responsibilities, structure, and reporting lines of the Senior Management members.

     In addition to any other regulatory or supervisory requirements, the duties of the Senior Management shall include but not be limited to the following:

     a) Implementing the strategic plans of the Company

     b) Managing the day-to-day activities

     c) Setting procedures for identifying, measuring, mitigating and monitoring risks

     d) Setting policies, procedures, and controls to ensure the adequacy and effectiveness of the internal control system

     e) Record keeping and audit trails

     f) Acting on the Board's instructions and reporting to the Board

     g) Ensuring that regulatory and supervisory requirements are met to the highest extent possible

129. Each Senior Management position shall have a documented and detailed job description specifying its roles and responsibilities, specifications or qualifications, reporting lines, key role interactions, authority, and authority limits.
130. Members of the Senior Management must possess the skills, knowledge, and experience needed for effective and prudent management of the Company. Proof of the qualifications of senior managers shall be provided to Saudi Central Bank upon request.
131. Senior Management shall provide the Board with a comprehensive overview of its performance in every board meeting at least.
132. Priority shall be given to Saudis for senior management positions. Before appointing non-Saudis in senior positions, the Company shall prove the lack of available qualified Saudi personnel for the required position, in accordance with the Saudi Central Bank's Requirements for Appointments to Senior Positions in Financial Institutions, issued in July 2013.