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18 August 2009
On June 15 2009 the Istituto per la vigilanza sulle assicurazioni private e di interesse collettivo (ISVAP), the regulatory body with authority over the insurance sector, published Document 33, a plan for the regulation of insurance companies' compensation policies. ISVAP has invited comments by October 15 2009.
The introduction states that although such policies are determined by individual companies, they must meet the criteria of sound and conservative management in order to avoid damaging events such as those affecting the world's financial markets.
In preparing the draft regulation, ISVAP has taken account of recent international guidelines, including the Financial Stability Forum's Principles for Sound Compensation Practices, announced in April 2009, and European Commission Recommendations 2009/384/EC and 2009/385/EC, which were issued on April 30 2009.
The regulation is composed of 28 articles under eight headings. Based on the principle of home country control, Article 3 provides that the regulation will apply only to insurance and reinsurance companies with registered offices in the Italian territory. In the case of Italian branch offices of companies based outside the European Union, the regulation will apply insofar as it is compatible with the legislation in the company's home country.
Article 4 establishes the general principles concerning compensation policies, stating that they must meet strategic objectives of profitability and business equilibrium in the long term and must avoid excessive exposure to short-term risk. Policies for directors remain the responsibility of the company's board of directors and are subject to the approval of the general meeting. Larger and more complex companies are required to form a compensation committee composed of a majority of their independent directors.
Article 11 states that non-economic objectives, such as regulatory compliance and the satisfaction levels of insured parties, must be considered in determining incentive systems.
According to Article 14, the amount due for early termination of directors must be kept within adequate limits. Specific rules are provided on policies for:
Thus, the compensation policies of insurance and reinsurance intermediaries and suppliers of outsourcing services must follow the general principles in Article 4 (ie, conservative risk management and coherence with long-term strategic objectives).
For further information on this topic please contact David Maria Marino or Bruno Giuffrè at Giuffrè Scorcelli Rosa & Partners - Studio Legale by telephone (+39 02 76 39 07 44), fax (+39 02 76 39 06 81) or email (email@example.com or firstname.lastname@example.org).
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