IVASS published on 5 June Regulation no. 38 concerning provisions on the corporate governance system (the “Regulation“) implementing EIOPA Guidelines pursuant to Solvency II Directive.
The Regulation will be applicable to: (i) insurance and reinsurance undertakings having a registered office in Italy (ii) the Italian branches of insurance and reinsurance undertakings having a registered office in a third State and (iii) the Italian ultimate parent company, only with respect to the provisions concerning the group corporate governance system.
In line with the content of the current Regulation No. 20/2008, the new Regulation provides roles and duties for corporate subjects, bodies and functions that compose the corporate governance system of insurance undertakings and has revised the rules that undertakings must comply with in order to implement the internal control and risk management systems and for the approval of a remuneration policy of corporate bodies, as well as the fit & proper requirements to be met by company’s directors and individuals in charge of other functions. One of the main goals of the new Regulation is to ensure that the board of directors has the ultimate liability for the corporate governance system of the insurance undertaking and for this purpose the relevant tasks of the board must be set out in detail and its members must be adequately and duly qualified.
The new regulatory provisions are to be read in connection with a Letter to the market published by IVASS on the same date, whereby the Italian regulator proposes that – based on the proportionality principle and in line with Solvency II approach – the prudential requirements shall apply proportionally based on the risk profile of the company depending on the nature, type and complexity of the risks related to the company’s business.
IVASS defines three corporate governance system “models”: enhanced, ordinary and simplified, depending on the circumstance that specific qualitative and quantitative criteria are satisfied. Based on that categories specific measures shall be established in order to design delegated management powers to the chairman, the board of directors and concerning the organization and outsourcing of key functions, the remuneration structure of corporate officers, of those in charge of key functions and of the other risk takers. Simplified rules are also set out for undertakings belonging to a group which are enrolled in the relevant register held by IVASS.
Furthermore, through the Letter to the market IVASS requires insurance undertakings to implement a self-assessment process with the aim of identifying the most appropriate corporate governance system, the outcome of which will be subject to communication to the Italian Regulator.
Upon entry into force of the new rules set out by the Regulation, the current inconsistent provisions contained in IVASS Regulation No. 20/2008, regarding internal controls, risk management, compliance and the outsourcing of activities of insurance undertakings, in IVASS Regulation No. 39/2011, on remuneration policies in insurance undertakings and in ISVAP Circular No. 574/D of 23 December 2005, concerning outwards reinsurance, shall be repealed.
Interesting news concern the procedures and the terms of the communications that insurance undertakings are required to send to IVASS in relation to outsourcing of activities (terms that are increased from 45 to 60 days for prior communications of outsourcing of crucial and significant activities to suppliers having registered office in the EEA, while the obligation to disclose to IVASS outsourcing of other activities in the EEA is repealed). A special regime is dedicated to the outsourcing of activities to companies of the same group, including crucial and significant functions and even if outsourced to suppliers belonging to the same group having their registered offices outside the EEA.
The Regulation provides a transitional period which identifies 31 December 2019 as the general term for implementing the new rules. In the event where amendments to the bylaws are necessary for the purposes of enacting structural changes of the board of directors, these shall be made in good time to ensure that they are effective on the potential renewals of corporate bodies approved during the general meeting called for the approval of the 2018 financial statements. The implementation of the new rules shall in any case be ensured by 2021.