The policy on overall investment strategy shall cover, at least, the following elements:
The investment objectives, both at Company and fund-specific levels;
The risk and liability profiles of the Company;
The strategic asset allocation, i.e., the long-term asset mix for the main investment categories, and their respective limits;
The extent to which the holding of certain types of assets is restricted or disallowed, such as illiquid or highly volatile assets; and
An overall policy on the usage of derivatives and structured products.
The Company should have in place a Board of Directors (BOD) level Investment Committee. The Investment Committee should have its own charter, investment policy and guidelines approved by the BOD. The Investment Committee can act as a management committee with members of the Investment Committee being elected by the Board of Directors. Members can be executive directors, executive management or members of any of the committees established by the Board of Directors. At a minimum, the Investment Committee shall be responsible for:
Establishing the investment strategy and policy for approval by the Board of Directors;
Setting the investment guidelines;
Reviewing / monitoring the investments;
In conjunction with the Audit Committee, determining the scope of the rigorous audit procedures that include full coverage of the investment activities to ensure timely identification of internal control weaknesses and operating system deficiencies; and
Assisting the Board of Directors in its evaluation of the adequacy and efficiency of the investment policies, procedures, practices and controls applied in the day-today management of its business through an audit report (either independent internal or external) that is to be submitted to the Audit Committee.
Senior management is responsible for managing and reviewing the investment policies of the Company and reporting the same to the Investment Committee. The function of senior management with the responsibility of executing the investment policy is to:
Manage and review the investment policies of the Company and reporting the same to the Investment Committee;
Ensure proper implementation of investment policies, procedures, practices and controls approved by the Investment Committee are applied in the day-to-day management of its business in accordance with the established levels of risk appetite;
Provide timely and regular reporting to the Investment Committee of the Company's investment activities;
Establish adequate internal controls to ensure that assets are managed in accordance with approved investment policies, and in compliance with legal, accounting and relevant risk management requirements. These controls shall ensure that investment procedures are documented and subject to effective oversight; and
Ensure adequate segregation of duties between execution, recording, authorization, reconciliation and related assurance activities.
The Company shall establish adequate internal controls to ensure that assets are managed in accordance with approved investment policies, and in compliance with legal, accounting and relevant risk management requirements. These controls shall ensure that investment procedures are documented and subject to effective oversight. There shall be in place adequate segregation of duties between execution, recording, authorization, reconciliation and related assurance.
The Company shall have in place audit procedures that include full coverage of the investment activities to ensure timely identification of internal control weaknesses and operating system deficiencies. If the audit is performed internally, it shall be independent and shall report to the Audit Committee, or its equivalent in the governance structure of Foreign Insurance Companies.
The Company shall consider the following, along with the supporting policies, procedures and infrastructure, when adopting internal controls:
Identification of personnel who are responsible and accountable for all transactions involving sales and purchase of assets;
Observations of restrictions on the empowerment of all parties to enter into any particular transaction. This will require close and regular communication with those responsible for compliance, legal and documentation issues in the Company;
Agreement from all parties of a given transaction with the terms of the deal. Procedures for sending, receiving and matching confirmations shall be independent from the issuance and marketing functions of the insurance policies;
Formal documentation is completed promptly;
Positions are properly settled and reported, and any late payments or late receipts are identified;
All transactions are carried out in conformity with prevailing market terms and conditions;
Authority limits are strictly enforced and all breaches are reported and remedial actions are taken promptly;
Independent checking of rates or prices and choice of rates shall not solely rely on dealers for rate/price information;
Set out the process for recommending, approving, and implementing decisions; and
Prescribe the frequency and format of reporting to relevant internal and external authorities.
Appropriate procedures shall be in place to enable the Company to monitor the interaction of its assets and liabilities to ensure that exposure to asset classes is contained within limits approved by the Company. The Company must define the exposure limits. The Company must ensure that the exposure limits are within the limits defined in paragraph (1) of Article (3). Procedures shall include testing of sensitivity to realistic scenarios that are relevant to the circumstances of the Company.
Appropriate procedures shall be in place to enable the Company to monitor the location of its assets and liabilities, so as to ensure that risk of localization mismatch is contained within limits approved by the Company. Procedures shall include testing of sensitivity to realistic scenarios, including political risk scenarios that are relevant to the circumstances of the Company.
The Company shall consider asset and liability risks on an integrated basis. Systems shall not consider only risks taken in isolation, but shall consider how even when individual risks are addressed, combinations of circumstances may still expose the Company to loss. This is of particular relevance where a single outcome is exposed to more than one risk.