Corporate governance seen as key to UAE's recovery

Corporate governance is not just another buzzword in today's economic climate, but rather a principle that must be integrated into the mind set of workers and the functions of every organisation, the UAE's Minister of Economy, Sultan Bin Saeed Al Mansoori, said in a keynote address at the workshop, which was organised by Hawkamah, the Institute for Corporate Governance.

'I believe this 100%, because a large percentage of the economic problems that arose over the past two years were due to the lack of corporate governance throughout the world, including here in the UAE and the region,' he said.

The workshop, 'The Changing Landscape of the Insurance Industry,' focused on the main challenges facing the insurance sector and the governance practices that can build trust and credibility in the industry.

Governance is key growth driver

Ahmed Humaid Al Tayer, Governor of the Dubai International Financial Centre, told attendees that corporate governance is one of the major drivers of sustainable, balanced growth in the financial services industry, including the insurance sector.

While the insurance industry was slowed by the global financial crisis, it weathered the downturn 'much better' than other financial sectors such as banking and securities, Al Tayer said. However, the crisis showed that many players in the industry lacked the ability to build a comprehensive picture of risk exposure at a corporate level, he said, noting that some insurance companies encountered unforeseen exposures in their investment portfolios.

Speakers said the insurance market is built largely on a foundation of trust and reputation, but the financial crisis showed that all of the effort used to build the industry's image can be undone very quickly. At the moment, the region's insurance sector is hampered by concerns over the lack of effective insurance supervision, differing accounting practices and the lack of independent and qualified company board members.

'From a wide perspective, the insurance industry is where the public puts their faith. It is their hedge against the uncertainties in the world. The insurance sector is a critical pillar in the overall functioning of the market. A strong insurance sector implies robust economic fundamentals,' Al Mansoori said.

Therefore, it is critical that lawmakers, regulators, companies, and stakeholders work together to develop corporate governance regulations in line with international standards, speakers said.

New standards

One of the UAE's first efforts to boost transparency and disclosure took place in April 2007 when the Securities and Commodities Authority issued the Regulation for Corporate Governance and Institutional Discipline Standards for public joint stock companies, Al Mansoori said. The authority authorised a transitional period of three years for making the implementation of these standards obligatory for all concerned companies, he noted.

Dr Nasser Saidi, Chief Economist of the DIFC, called on insurance regulators and commissioners in the Mena region to adopt corporate governance principles outlined by the International Association of Insurance Supervisors for insurance companies and to adopt uniform insurance corporate governance standards and guidelines.

At an industry level, he said the region's insurance sector should take steps to ensure that accounting, actuarial, and auditing standards are comprehensive, documented, transparent and consistent with international standards. The major failure that contributed to the financial crisis in the UAE was the lack of corporate governance, he said, but the advantage moving forward is that 'we are working with a clean slate' in terms of developing standards and guidelines for businesses in the country.