The OECD approved Thursday new guidelines for insurers and pension funds designed to strengthen investor and customer confidence in the insurance industry and protect people’s pensions from mismanagement and fraud.

The group says that recent scandals revealing huge financial irregularities highlight the need for the insurance industry and its watchdogs to improve governance standards. The OECD is calling on insurers to comply with existing regulations and urges them to put in place additional internal checks and balances to improve integrity and their business practices.

It has issued 12-point Guidelines for Insurers’ Governance that provide governments and the insurance industry with a roadmap to do this and thereby better protect policyholders and shareholders. They include specific proposals for:

  • the structure and responsibilities of the board;
  • the integrity and accountability of board members;
  • strict internal control and reporting systems;
  • independent, external auditors to certify an insurer’s accounts at least once a year and who has the power to alert regulators to irregularities or criminal violations;
  • clear and timely disclosure to policyholders, shareholders and regulators; and
  • access to prompt redress through the courts or regulators or the setting up of alternatives such as internal dispute procedures and independent arbitrators.



OECD countries have also officially endorsed the 12-point Guidelines for Pension Fund Governance, building on an initiative to set international standards for the governance of private pension funds. These funds are among the largest institutional investors in many OECD countries, holding assets worth more than US$10 trillion in 2003. Yet high-profile company bankruptcies have revealed that many funds have huge deficits and the retirement benefits of their employees are at risk, the OECD says.

The guidelines propose that pension fund managers be held legally accountable for protecting the interests of retirement plans’ members and beneficiaries. They include specific proposals that include increasing the accountability, integrity and experience of individuals on fund governing bodies, promoting transparency and clearer communication between fund managers and plan members, and strengthening the role of both actuaries and auditors as “whistleblowers”.

Both sets of guidelines draw on the OECD’s Principles of Corporate Governance that were created in 1999 and revised in 2004. The pensions guidelines complete the OECD Recommendation on Core Principles of Occupational Pension Regulation issued in 2004 and the related guidelines on the rights of pension beneficiaries.