Corporate Governance in the Insurance and Bonding Institutions

Article 69 of Insurance and Bonding Institutions Legislation

The Insurance and Bonding Institutions will have an effective system of government to ensure prudent management of the activity as well as a transparent and appropriate organizational structure with a clear allocation and appropriate segregation of duties, effective mechanisms to ensure the transmission information and policies and practices consistent with risk management.

The system of government will explicitly include the fulfillment of the demands of professional capacity and integrity of the people running the entity, as well as the requirements led to the establishment and verification of policies and procedures relating to internal risk assessment and solvency, internal control and compliance, internal audit, actuarial function and outsourcing of functions or activities.

The corporate governance model should be established according to the "Principle of Proportionality ', therefore you must consider the volume of operations and the nature and complexity of the activities and risks of the institution.

The National Commission of Insurance and Bonds (the "Commission"), with the agreement of the Board of Governors shall issue general regulations, laying down the elements that the institutions should consider in the design of policies and procedures that conform their corporate governance model.

Additionally, the Commission in the exercise of its powers of inspection and enforcement shall, in general provisions, establish mechanisms to ensure that the governance model of the institutions complies with the necessary requirements.

A framework of internal control widely used internationally, which is common in the supervision of financial markets and which is also influencing the European framework of Solvency II in terms of the definition of the components of internal control, is the internal control model "COSO "(Committee of Sponsoring Organizations of the Treadway Commission).

The COSO model approach considers the correlation between the stated objectives by the Corporate Governance, the components required to achieve the objectives, and the organizational structure to be able to implement and control. Internal control components of the conceptual framework established in the COSO model, are:

• Control Environment

• Risk Assessment

• Control Activities

• Information and Communication

• Oversight

The comprehensive and thorough review of the corporate governance model will be a cornerstone in the implementation of the Solvency regime in Mexico and in the strategic management of its results, giving confidence to the policyholders, the regulator, the shareholders of the institution and any other third party involved.