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Last Updated: 09/24/2025

Corporate governance is the system of rules, practices, and processes by which an insurance company governs itself. Corporate governance includes not only the obvious corporate structure (board of directors, senior management, business area functions, etc.) but also a company’s organizational culture (values, ethics, etc.), strategies, controls, as well as all the governing documents that capture the spirit and the letter of a company’s guiding principles and mandates.

Corporate governance also requires a clear line of sight from the board of directors to risk appetite, capital planning, and the insurer’s use of risk transfer and risk financing, so that oversight of strategy, risk, and capital remains integrated and documented.

Corporate governance defines all organizational roles, responsibilities, and accountabilities at all levels. It describes and explains the management hierarchy, that is, the decision-making and accountability chain and ultimately who has the power to manage and legally represent the company in all settings. Corporate governance spells out requirements for documenting decisions and actions as well as the thinking behind them. It also provides corrective action for non-compliance or weak oversight, controls, and management.

Current regulatory practice emphasizes how the board of directors and senior management evidence their oversight of material risk categories and capital adequacy, and how they coordinate with enterprise risk management processes described in the Own Risk and Solvency Assessment. This linkage allows regulators to understand how governance, risk, and capital interact in practice.

Hence, corporate governance addresses the allocation and regulation of power and accountabilities within an insurer and avoids undue concentration of authority and power. Also, corporate governance has to be transparent and have appropriate systems, controls, and limits to ensure the given authority and power is used to protect the interests of all of the insurance company’s stakeholders.

Regulators focus on whether documentation shows an effective challenge culture, clear escalation protocols, and the board’s direct involvement in oversight of critical risk areas, including underwriting, reinsurance, investment risk, operational resilience, and the use of external models.

Status: The Corporate Governance Annual Disclosure Model Act and Regulation (#305/#306) details requirements for extensive disclosure of regulated insurance companies’ corporate governance practices. The Model Act became an Accreditation requirement on January 1, 2020. The Model Act requires each U.S. insurer (or the insurance group in which the insurer is a member) to submit a Corporate Governance Annual Disclosure (CGAD) to its lead state or domestic regulator on an annual basis.

Under the implementing regulation, the disclosure is due each year by June 1 to the lead state or domestic regulator and may be filed at the insurance-group level. The filing is confidential and privileged by law, and it may be shared with the National Association of Insurance Commissioners and qualified third-party consultants under the same protections. The Corporate Governance Annual Disclosure allows insurers to reference existing documents and prior-year materials to reduce burden, but failure to file without cause can lead to penalties under state law.

In 2025, regulators also advanced related governance initiatives, including a task force to strengthen oversight of risk-based capital model governance, reinforcing expectations for transparency and control over methodologies that affect capital adequacy.

In the CGAD, insurers must document confidential information about their corporate governance framework. This includes the policies of their boards of directors and key committees, the frequency of their meetings, and the procedure for the oversight of critical risk areas and appointment practices. Insurers must also disclose the policies and practices used by their board of directors for directing senior management on critical areas. This includes a description of codes of business conduct and ethics and processes for performance evaluation, compensation practices, corrective action, succession planning, and suitability standards. This information is utilized by insurance regulators to understand, review and assess the corporate governance practices of insurers in their ongoing solvency monitoring activities.

Regulators review these materials together with the Own Risk and Solvency Assessment Summary Report to assess whether governance practices are consistent with stated risk appetite and whether capital resources are sufficient for the insurer’s risk profile.