Role of the board

The primary responsibility of the Board is to provide effective leadership to ensure that it promotes the success of the company for the benefit of its members as a whole. The Board, supported by its committees, provides entrepreneurial leadership within a framework of prudent and effective controls. The Board is accountable to stakeholders for the creation and delivery of strong sustainable performance and the creation of long-term shareholder value. 

The directors may exercise all the powers of the company subject to the Articles of Association, relevant law and any directions that may be given by the company at general meetings by shareholder resolution. The directors may delegate any of their powers or discretion to committees.

The Board sets annual objectives for the business in line with the current Group strategy and monitors achievement against these objectives through regular reports. These include updates from the group chief executive and the group chief financial officer on all material business matters.

There is a rolling agenda of items for consideration by the Board that is continually refreshed in line with the needs of the business.

There is a schedule of matters reserved for the Board that can only be amended by the Board itself. This is reviewed annually. 

Matters reserved to the Board include: 

  • Approval of the Group’s long-term objectives and commercial strategy;
  • Approval of changes to the Group’s senior management structure;
  • Approval of the Group’s overall risk appetite;
  • Annual review of the effectiveness of the Group’s systems of risk management and internal control;
  • Approval of the annual operating and capital budgets changes to the Group’s capital structure;
  • Approval of the Group's financial results and any significant changes to accounting practices or policies;
  • Corporate governance arrangements; and
  • Approval of any significant expenditure, material transactions and contracts.

Board committees

The Board delegates certain duties to its committees so that matters receive detailed consideration. Terms of reference for each committee set out the authority delegated from the Board, and these have been reviewed and approved by the board during the year.

The composition of each committee is recommended by the Group nomination and governance committee to the Board for approval. This is reviewed on an annual basis or more frequently if appropriate. When reviewing committee membership, consideration is given to each individual’s expertise and experience.

Board appointments

When appointing new directors, regard is given to the size of the Board, the balance of executive and non-executive directors and the benefits of diversity, including gender. The Board considers the skills, experience, independence and knowledge already represented when making decisions on new appointments and ensures that succession planning processes are in place.

Division of responsibilities

Role of chairman

  • Leadership of the Board, promoting a culture of openness and debate;
  • Effectiveness of the Board;
  • Ensuring provision of timely, accurate and clear information;
  • Ensuring the Board determines the nature, and extent, of the significant risks the company is willing to embrace;
  • Ensuring membership of the Board has the right balance of skill and experience to support the needs of the business;
  • Effectiveness and structure of the Board’s committees;
  • Maintain effective communication with shareholders and Board understanding of major investor views;
  • Leading the annual evaluation of the Board and its committees’ performance;
  • Performance of Board committees and individual directors;
  • Agreeing training and development plans for each director;
  • Ensuring a tailored induction for new directors;
  • Monitor the succession planning and Board composition based on the recommendations by the Group nomination and governance committee;
  • Leadership of the Board in agreeing the Group’s strategic operating plans and budgets;
  • Ensuring relevant objectives are established for the group chief executive and his management team;
  • Reviewing with the group chief executive the overall performance of the company and its senior management; 
  • Undertaking the role of ambassador for the company, participating in the engagement and effective communication with the company’s stakeholders; and 
  • Chairing effective general meetings.  

Role of group chief executive

  • Developing targets and goals for the senior management of the company;
  • Developing, recommending and presenting to the Board, taking into account any threats or opportunities: strategic plans, risk appetite for the business,risk exposure;
  • Preparing detailed business plans for the company and its major subsidiaries, monitoring the performance of the Group, ensuring that objectives are achieved and business plans are implemented within budget;
  • Overseeing, directing and controlling financial management, control standards and reporting processes of the company and its main subsidiaries;
  • Reviewing the organisational framework to ensure that policies relating to management selection, performance review, development and change are appropriate;
  • Ensuring that management succession plans are in place Identifying and executing acquisitions and disposals up to prescribed limits;
  • Compliance with legal and regulatory requirements of the relevant regulatory bodies;
  • Developing the company’s communications strategy to meet the needs of, and engage with, all internal and external stakeholders;
  • Representing the company in the industry and business community; and
  • Liaising with the chairman and Board on matters which are material to the performance of the company.  

Role of senior independent director

  • Providing support to the chairman in the delivery of his responsibilities when required;
  • Assisting in matters relating to Board evaluation;
  • Chairing the group nomination and governance committee when considering matters relating to the chairman of the Board;
  • Ensuring that the views of each of the non-executive directors are given due consideration and facilitating communication between the non-executive directors and the chairman;
  • Holding meetings with the non-executive directors without the chairman being present to review the chairman’s performance; and
  • Lead the annual appraisal of the chairman's performance.

Role of non-executive directors

  • Remain independent in character and judgement, ensure no relationships, conflicts of interest or circumstances which are likely to affect the exercise of judgement;
  • Form and maintain balanced understanding of the views and issues of concern to major shareholders and to attend meetings with those major shareholders or financial analysts if requested;
  • Challenging and agreeing the Group’s strategy with senior management;
  • Be satisfied the integrity of financial information and the Group’s financial controls and systems of risk management are robust and defensible;
  • Assessing the performance against Group strategy;
  • Participating in the activities of the Board committees. Committee selection is regularly reviewed by the group nomination and governance committee based on skills and experience;
  • Meet with the chairman without executive directors being present to appraise performance of the executive team;
  • Meeting with the senior independent director without the chairman being present to review the chairman’s performance and other matters; and
  • Ensure concerns which cannot be resolved about the running of the company or proposed actions are recorded in the relevant board or committee minutes.

Composition of the Board

The Board considers the skills, experience, independence and knowledge already represented when making decisions on new appointments and ensures that succession planning processes are in place. The group nomination and governance committee recommend directors for appointment or re-election to the Board. Directors are proposed for annual election or re-election by shareholders at the company’s AGM, if they wish to stand.

The nomination and governance committee monitors the balance of skills, experience, independence and knowledge on the Board as well as gender diversity as at February 2016, the Board comprises 78% male and 22% female directors and this will decrease to 20% female when Martin Strobel joins the board on 1 May 2016. However, we remain committed to Lord Davies target for female board composition however, all appointments are made on merit against the agreed selection criteria. On reviewing the diversity on the Board, the committee agreed that there was no evidence during the year to suggest that a lack of gender diversity had compromised Board debate. However, as we announced at the 2015 AGM, we feel that the Board could benefit from two additional independent non-executive directors. We are seeking individuals whose skills complement and strengthen the Board. Major shareholders have been engaged to understand their views on the skills required on the Board and The Zygos Partnership have been appointed to conduct the search. Zygos has no other connection with the Group. They are accredited by the Davies Review under the Enhanced Code of Conduct for Executive Search Firms as they have a strong track record in assisting boards to enhance their gender diversity.

Details of current directors together with their biographical and committee membership details are set out in the 2015 Annual Report and Accounts.

Commitment

The letters of appointment for the chairman and each of the non-executive directors set out their anticipated time commitment, being an average of two days per week for the chairman and 28-32 days per year for non-executive directors. Non-executive directors are required to allocate sufficient time to meet the expectations of the role, in attending Board and committee meetings and the AGM. In addition, Non-Executive Directors may be required from time to time to attend meetings, training and briefings, and to spend time in the business.

Throughout 2015, directors have demonstrated flexibility and commitment in attending numerous Board and committee meetings at short notice, and have made themselves available to meet with the Group’s lead regulators as required. This is especially evident in the number of additional meetings held due to the unsolicited approach from Zurich in July 2015.

Martin Scicluna is also chairman of Great Portland Estates plc and senior independent director and audit committee chairman of Worldpay Group plc. The Board is satisfied that these commitments are not a constraint on the chairman’s time or his ability to carry out his duties.

Stephen Hester and Scott Egan are not currently directors of any listed companies but would be allowed to have one such appointment, subject to approval from the group nomination and governance committee.

Service agreements and letters of appointment, for both the executive and non-executive directors, are available for inspection at the company’s registered office and at the AGM.

Induction, training and development of directors

Upon appointment to the Board, directors undertake an induction programme, receiving a broad range of information about the company that is tailored to their existing knowledge and experience. The induction programme includes: information on the operational performance and business of the Group, details of Board procedures, corporate governance and directors’ responsibilities. In addition, each new director attends a series of meetings with senior management covering all aspects of the business including: risk, regulatory risk and compliance, claims, capital, reserving, underwriting, internal audit, IT and e-business and HR. They are also invited to attend meetings of each of the Board committees at least once during their induction.

The Group General Counsel and company Secretary is responsible for assisting the chairman in arranging the induction programme, training schedules and professional development of the directors and for bringing all governance matters to the attention of the Board.

The directors have access to the services and advice of the Group General Counsel and company Secretary and may take independent professional advice at the expense of the company in the furtherance of their duties.

Directors' training

Directors of the company have attended training sessions and seminars during the year to enhance their knowledge. Topics covered in 2015 include:

  • Solvency II;
  • The Group’s control environment, the three lines of defence and the importance of policies, procedures and behaviour;
  • Know Your Client, sanctions, politically exposed persons and anti-money laundering;
  • Underwriting and claims;
  • Audit committees’ key current and developing challenges and issues;
  • Financial reporting council update on regulations;
  • Financial reporting technical updates;
  • Corporate governance;
  • Meetings with various function heads and regional business areas to enhance their technical knowledge; and
  • Understanding of the business. 

Performance Evaluation

To ensure the Board remains effective, an internal performance evaluation is carried out annually. At least once every three years, the evaluation process is carried out by an external party followed by two years of an internal evaluation process. During 2015, the chairman led an internal evaluation with support from the company Secretary. The evaluation was carried out using an online questionnaire, involved all directors and regular attendees, and reflected on the key areas identified in the previous evaluation for focus during 2015. It considered the Board and Board committee composition, performance, oversight, knowledge and understanding. An external performance evaluation will be carried out in 2016.

The results of the 2015 evaluation were presented to the group nomination and governance committee, which concluded that the Board and its committees had operated effectively throughout 2015, with good relationships between directors and a high level of transparency and trust in the Boardroom, enabling quality debate and challenge. In particular, the Committee highlighted that the process during the possible takeover period from July to September 2015 was handled very well with swift, decisive actions taken whilst sufficient time was given to evaluating the options in a structured manner.

The group nomination and governance committee agreed the following actions to further improve the Board and committees’ effectiveness during the course of 2016 as follows:

  • Continue the recruitment of two additional non-executive directors
  • Directors to spend greater time engaging with the business, both formally and informally through individual site visits and meetings with management
  • To re-focus on trends shaping the Group’s long-term strategy post turnaround
  • More time to be spent on broader stakeholder views including customers and employees and developing the Group’s brand and culture as the long-term strategy develops.

The chairman has also reviewed the performance of each of the directors during 2015 and concluded that each director contributes effectively to the Board and that each non-executive director devotes sufficient time to their role. The group nomination and governance committee considered the evaluation and concluded that each director be recommended to shareholders for election or re-election at the 2016 AGM.

The senior independent director met independently with each of the non-executive directors to evaluate the performance of the chairman. The review concluded that the chairman had led the Board in a highly effective way throughout the year.

Re-election

The directors and shareholders by ordinary resolution may appoint a person who is willing to be a director either to fill a casual vacancy or as an additional director. In accordance with the Code, each director will submit themselves for election or re-election, as appropriate, at each AGM. Resolutions to elect or re-elect Directors at the AGM are subject to the approval of the Board, taking into account the recommendations of the group nomination committee.

Shareholders may, by ordinary resolution of which special notice has been given, remove any director before the expiration of his period of office.

The group nomination and governance committee recommend directors for appointment or re-election to the Board. directors are proposed for annual election or re-election by shareholders at the company’s AGM, if they wish to stand.

Regulatory compliance

The Board is responsible to the PRA and the Financial Conduct Authority (FCA) for complying with the Group’s UK insurance regulatory obligations. The Board attaches great importance to its regulatory responsibilities and is committed to dealing with the regulators in an open, cooperative and transparent manner. The Board paid close attention to the expectations of the PRA and FCA with particular focus on Solvency II and the Internal Model application process. During the year the PRA and FCA conducted private meetings with several members of the Board and executive management and regular management information is provided to assist them with the supervision of the Group. In addition, the Group includes a number of regulated entities which foster positive regulatory relationships in support of the business. Accordingly, maintaining effective relationships with the Group’s regulators across the world is integral to the success of the Group’s strategy and its long-term value