SECP Directs Insurance Companies to Outsource Internal Audit Function

The Securities and Exchange Commission of Pakistan (SECP) has directed the insurance companies to outsource their internal audit function to professional services firms.

Under the revised Code of Corporate Governance for Insurers issued by the SECP on Friday, the internal audit function, wholly or partially, may be outsourced by the insurer to a professional services firm or be performed by the internal audit staff of the holding company.

In lieu of outsourcing, the insurer shall appoint or designate a full-time employee other than the chief financial officer or an employee directly reporting to the chief financial officer, as head of internal audit holding equivalent qualification prescribed under this code, to act as a coordinator between firm providing internal audit services and the Board, provided that while outsourcing the function, the insurer shall not appoint its existing external auditors or any of its associated company or associated undertaking as internal auditors.

The head of internal audit shall functionally report to the audit committee and administratively to the Chief Executive Officer of the company, the amended code said.

The Claims Settlement Committee shall oversee the activities of the grievance function of an insurer and shall present summary results of the complaints lodged, resolved, and outstanding, to the board of directors at least on a quarterly basis.

Under the amended Code, all board committees of an insurer, except the Audit Committee, shall meet at least twice a year. The proceedings of the meetings of all committees (whether management committees or the Board committees) shall be recorded and be kept at the insurer’s head office.

Alongside, each committee of an insurer shall appoint a secretary of the Committee. The secretary shall circulate minutes of meetings of the relevant Committee to all members, directors and, if necessary, the Chief Financial Officer within a fortnight, SECP stated.

The amended code also states that the insurer shall have a board of directors approved employee trading policy that governed trading or investment in securities by its employees, their spouses, and dependent children to ensure compliance with regulatory requirements governing the prohibition of insider trading.

Such policies shall at least cover disclosure requirements, retention of records, and stringent requirements for personnel involved in investment decision function or process, SECP added.