Part 1: Introduction
- This Regulation enumerates Saudi Central Bank's corporate governance requirements that must be met by insurance and/or reinsurance companies.
- The objective of This Regulation is to set high standards of corporate governance within the insurance industry in accordance with the recognized best international practices.
- Saudi Central Bank may, at any time, require any of the insurance service providers to comply with some or all of the requirements of this Regulation.
- This Regulation shall be read in conjunction with the following:
- The Law on Supervision of Cooperative Insurance Companies promulgated by Royal Decree M/32 dated 2/6/1424 H and its Implementing Regulations
- The Companies Law
- The Corporate Governance Regulations in the Kingdom of Saudi Arabia and the Listing Rules, issued by the Board of the Capital Market Authority (CMA)
- The Insurance Market Code of Conduct Regulation, the Risk Management Regulation, the Antifraud Regulation, the Anti-money Laundering and Combating Terrorism Financing Rules, the Regulation of Reinsurance Activities, the Insurance Intermediaries Regulation, the Online Insurance Activities Regulation, the Investment Regulation the Outsourcing Regulation, the Insurance Audit Committee Regulation, the Actuarial Work Regulation for Insurance and Reinsurance Companies, the Requirements for Appointments to Senior Positions in Financial Institutions Supervised by the Saudi Arabian Monetary Agency, and any other regulations and relevant directives and circulars and resolutions issued by Saudi Central Bank.
5. This regulation has been issued in both Arabic and English. In the event of discrepancy in the interpretation of the two texts, the Arabic text prevails.
Definitions
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:
- Being a Significant Shareholder in the Company, or in a Related Company, working for or representing a Significant Shareholder
- Being a member of the Board in a Related Company or one of its subsidiaries, or having been one during the past two years
- Being a member of the Board of the Company for more than nine years
- Holding a Senior Management position in the Company, or in a Related Company, or having held one during the past two years
- 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
- Being a Related Person of a member of the Board or Senior Management of the Company or of a Related Company
- 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
- 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.
Compliance Measures
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.
Non-Compliance
9.Non-compliance with the requirements set forth in this Regulation will be deemed a breach of the Law on Supervision of Cooperative Insurance Companies and its Implementing Regulations and the licensing conditions and may expose violating Companies to enforcement actions.