Corporate Governance

The Board

The board consists of a non-executive chairman, Jonathan Agnew, together with seven independent non-executive directors, of which George Blunden is the senior independent non-executive director, and six executive directors, of which Andrew Horton is chief executive. The non-executive directors, who have been appointed for specified terms, are considered by the board to be independent of management and free of any relationship which could materially interfere with the exercise of their independent judgement.

Biographies of current board members appear on pages 50 to 51 of this report. These indicate the high level and wide range of business experience that are essential to manage a business of this size and complexity. A well defined operational and management structure is in place and terms of reference exist for all board committees. The roles and responsibilities of senior executives and key members of staff are clearly defined.

The full board meets at least five times each year and more frequently where business needs require. The board has a schedule of matters reserved for its decision. This includes, inter alia strategic matters; statutory matters intended to generate and preserve value over the longer term; approval of financial statements and dividends; appointments and terminations of directors, officers and auditors; appointments of committees and setting of terms of reference. It is responsible for the review of group performance against budgets; approving of risk management strategy and material contracts; determining of authority levels within which management is required to operate; reviewing the group’s annual forecasts and approval of the group’s corporate business plans, including capital adequacy and the own risk solvency assessment. The board has also appointed an executive committee with delegated responsibility for particular matters such as considering the business plan, the underwriting, risk and regulations (included the effectiveness of the internal control and risk management systems), investments and operations.

There is an agreed principle that directors may take independent professional advice if necessary at the company’s expense, on the basis that the expense is reasonable. This is in addition to the access which every director has to the company secretary. The secretary is charged by the board with ensuring that board procedures are followed.

To enable the board to function effectively and directors to discharge their responsibilities, full and timely access is given to all relevant information. In the case of board meetings, this consists of a comprehensive set of papers, including regular business progress reports and discussion documents regarding specific matters.

The composition of and appointments to the board of both executive and non-executive directors are considered by the nomination committee. The recommendations of the nomination committee are ultimately made to the full board, which considers them before any change is made. The remuneration committee considers any remuneration package of executive directors before it is offered to a potential appointee. The members of the audit, remuneration and nomination committees are set out below.

The board is complying with the provision on annual re-election of all directors introduced by the UK Corporate Governance Code.

Full details of directors’ remuneration and a statement of the company’s remuneration policy are set out in the directors’ remuneration report on pages 57 to 72. The members of the remuneration committee and the principal terms of reference of the committee appear on page 55. View full report.

Meetings with Non-Executive Directors

The chairman holds meetings as required with the non-executive directors without the executive directors being present.

Board Performance Evaluation

Under the UK Corporate Governance Code, the board is required to undertake a formal and rigorous evaluation of its own performance and that of its committees and individual directors. A self assessment of the board and its committees was carried out in 2011.

View the individual attendance by directors at regular meetings of the board and of committees

Board Committees

The company has established properly constituted audit, remuneration and nomination committees of the board.

The Beazley plc matters reserved for the board can be found here.

Audit Committee

The audit committee currently comprises Gordon Hamilton (committee chairman), Vincent Sheridan, George Blunden and Rolf Tolle. The committee regularly meets without any executive management being present and the committee holds regular meetings with the head of internal audit and with the external auditor.

The committee’s main objectives are, inter alia: to monitor the integrity of the company’s financial statements and any other formal announcements relating to the company’s financial performance; review significant financial reporting judgements contained in them, before submission to and approval by, the board, and before clearance by the external auditors; review the company’s internal financial controls and the company’s internal control and risk management systems including risk appetite; approve the appointment or termination of appointment, of the head of internal audit and monitor and review the effectiveness of the company’s internal audit function; and review the arrangements by which employees of the company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters.

The committee also reviews any matters raised by the external auditors and internal audit. The chief executive, the finance director, and the chief risk officer are invited to attend part of each meeting of this committee. The audit committee received a number of presentations during the year on operational and underwriting activities. The external auditors are invited to attend meetings regularly. The auditors have unrestricted access to the members of the audit committee, and the committee ensures that meetings are used as a forum for discussion and communication between compliance, internal audit, the external auditors and the board. The committee receives regular updates and monitors the status of actions taken by management to address issues raised by both external and internal audit. Risk management provides reports to the audit committee on the risk assessment and the self-certification from risk owners of the operating effectiveness of internal controls. The audit committee undertakes a regular appraisal of its performance in relation to best practice. Findings of this review are formally reported to the board.

In respect of any firm of external auditors and consulting actuaries which may be appointed by any group company, the audit committee is also responsible for recommending their appointment and termination; recommending their terms of reference; receiving regular reports, independent of management where necessary; determining their independence; monitoring their performance; and approving their fees.

Following a recommendation from the audit committee, the board has adopted a policy in relation to the provision of non-audit services by the auditors. The objective is to ensure that the provision of such services does not impair the external auditor’s objectivity. The policy specifically disallows certain activities to be provided by the auditors such as bookkeeping and accounting services, internal actuarial services and executive remuneration services. The policy requires pre-approval for all other material services such as due diligence assistance, tax services and advice on accounting and audit matters.

The aim is to limit the total spend on non-audit services to a maximum of the annual audit fee unless it is deemed to be in the shareholders’ interest from an efficiency and effectiveness point of view.

The split between audit and non-audit fees for the year under review is disclosed on page 108. All of these are considered by the audit committee not to affect the auditors’ independence or objectivity.

The committee’s terms of reference are published on the company’s website.

The committee's terms of reference can be found here.

Remuneration Committee

The remuneration committee comprises Padraic O’Connor (who was appointed committee chairman following the departure of Andy Pomfret on 21 July 2011), Gordon Hamilton, George Blunden and Ken Sroka. The work of the remuneration committee is covered further in the directors’ remuneration report on pages 57 to 72.

Copies of executive directors’ service contracts and the terms and conditions of appointment of the non-executive directors are available for inspection at the company’s office during normal business hours.

The terms of reference of the remuneration committee are published on the company’s website.

The committee's terms of reference can be found here.

Nomination Committee

The nomination committee consists of Jonathan Agnew as the chairman, together with George Blunden, Gordon Hamilton and Dennis Holt (from 21 July 2011). Andy Pomfret left the committee on 21 July 2011. It meets as required and makes recommendations to the board on all board appointments, including the selection of non-executive directors. During 2011 the nomination committee carried out the search for a new chairman. Independent external advisors were engaged to support the search which resulted in the nomination committee recommending the appointment of Dennis Holt. The committee has reviewed the constitution of the committees and recommended the appointment of Dennis Holt to the nomination committee. The committee also recommended the appointment of Padraic O’Connor as chairman of the remuneration committee and George Blunden as senior independent director. In response to challenges to ensure diversity within in the UK board room, the board is seeking to appoint one female director by 2015 at the latest and the nomination committee will seek to ensure that this happens. The committee has also considered the performance of and succession plans for the executive directors. A full board and committee assessment has been carried out in 2011 and matters arising are being appropriately addressed.

The terms of reference of the nomination committee are published on the company’s website.

The committee's terms of reference can be found here.

Shareholder Communication

The company places great importance on communication with shareholders. The full report and accounts and the interim report will be available from www.beazley.com and on request, will be mailed to shareholders and to other parties who have an interest in the group’s performance. The company responds to individual letters from shareholders and maintains a separate investor relations centre within the existing www.beazley.com website as a repository for all investor relations matters.

There is regular dialogue with institutional shareholders as well as general presentations, attended by executive directors, after the preliminary and interim results. The board is advised of any specific comments from institutional investors to enable it to develop an understanding of the views of major shareholders. All shareholders have the opportunity to put forward questions at the company’s annual general meeting.

The company has the authority within its articles to communicate with its shareholders using electronic and website communication and to allow for electronic proxy voting.

Audit and Internal Control

The respective responsibilities of the directors and the auditors in connection with the accounts are explained on pages 76 to 78, and the statement of directors on going concern on page 74.

The board confirms that there is a continuous process for identifying, evaluating and managing any significant compliance issues and risks facing the group. All significant risks are captured in the Beazley risk register and monitored on a monthly basis. The risk register and the relating internal capital assessment process are subject to review, challenge and approval by the board.

The directors are responsible for the group’s system of internal control and for reviewing its effectiveness. However, such a system can only provide reasonable, but not absolute, assurance against material misstatement or loss. The system is designed to manage rather than eliminate the risk of failure to achieve business objectives within the risk appetite set by the board.

The key procedures that the directors have established to ensure that internal controls are effective and commensurate with a group of this size include:

• the day-to-day supervision of the business by the executive directors;
• review and analysis by the various group committees of standard monthly, quarterly and periodic reporting as prescribed by the board;
• review of financial, operational and assurance reports from management; and
• the review of any significant issues arising from external audits.

Further information on the role of the audit committee is set out above. The committee, on behalf of the board, approves the internal audit plan and any subsequent changes. Internal audit reports directly to the audit committee, whose terms of reference include approving the appointment or termination of appointment, of the head of internal audit and monitoring and reviewing the effectiveness of the company’s internal audit function.

Further information on risk management at Beazley is contained on pages 43 to 45.

Beazley plc Registered Office Details

Beazley plc is a public limited company registered in Jersey under registered number: 102680, whose registered address is at 22 Grenville Street, St Helier, Jersey, JE4 8PX. Please contact us at the address below should you have any queries:

Beazley plc
2 Northwood Avenue,
Northwood Park,
Santry Demesne, Santry,
Dublin 9
Ireland

For details of other Beazley company offices, please contact the Company Secretary.