Corporate Governance

Compliance with Code Provisions

The board confirms that the company and the group have, save for the composition of the board, complied with the provisions set out in the Combined Code for the year ended 31 December 2007.

The board is accountable to the company’s shareholders for good governance and the statements set out below describe how the principles identified in the revised Combined Code have been applied by the group.

The Board

The board consists of a non-executive chairman, Jonathan Agnew, together with five independent non-executive directors, of which Andy Pomfret is the senior non-executive director, and seven executive directors, of which Andrew Beazley is chief executive. All five of 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.

Given that the business of the group is insurance underwriting organised by line of business in divisions, the board continues to consider it appropriate that some of the underwriting heads of the major divisions should be executive directors. Notwithstanding that the company is included in the FTSE 250 index, it does not consider it desirable to increase the number of non-executive directors to outnumber the executive directors since the range of skills and experience of the existing non-executive directors is sufficient and the increased size of the board would make it unwieldy. Indeed the board intends over the medium term to reduce its size to some extent, provided that this can be achieved without significantly impairing the underwriting experience represented on it.

Biographies of board members appear on the Directors section of the website. These indicate the high levels and 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 four times each year and more frequently where business needs require. The board has a schedule of matters reserved for its decision including, inter alia: statutory matters; approval of financial statements and dividends; appointments and terminations of directors, officers and auditors; appointments of committees and setting of terms of reference; review of group performance against budgets; approving of risk management strategy and material contracts; and the determining of authority levels within which management is required to operate.

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, nomination and investment committees are set out below.

Any director appointed during the year is required, under the provisions of the company’s articles of association, to retire and seek re-election by shareholders at the next annual general meeting. The articles also require that one third of the directors retire by rotation each year and seek re-election at the annual general meeting, and the directors required to retire are those in office longest since their previous re-election. In addition, each director is required to retire at least once in any three-year period.

Full details of directors’ remuneration and a statement of the company’s remuneration policy are set out in the directors’ remuneration report in the annual report. The members of the remuneration committee and the principal terms of reference of the committee appear further down this page.

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

In accordance with the requirements of the Combined Code, the board undertook a formal and rigorous evaluation of its own performance and that of its committees and individual directors in 2007 and the issues identified and recommendations from the evaluation, in particular in relation to the composition of the board are to be implemented.

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, nomination and investment committees of the board.

Audit Committee

The audit committee currently comprises Andy Pomfret (committee chairman), Dudley Fishburn, Marty Becker and Gordon Hamilton. The committee regularly meets without any executive management being present and the committee hold regular meetings with the head of internal audit, and with the external auditors.

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; 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 risk management director are invited to attend part of each meeting of this committee. The external auditors are invited to attend meetings regularly. The external auditors have unrestricted access to the members of the audit committee, and the committee ensures that meetings are used as an open avenue of 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.

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, independently 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 auditor such as bookkeeping and accounting services, internal actuarial service, internal audit outsourcing services and executive remuneration services. The policy requires pre-approval for all material other 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 in the annual report. All of these are considered by the audit committee not to affect the auditors’ independence or objectivity.

Following publication of the Combined Code on corporate governance, the terms of reference of the audit committee have been expanded.

Download the Terms of Reference of the audit committee. (PDF, 42 KB, opens in a new window)

Remuneration Committee

The remuneration committee comprise Dudley Fishburn as chairman, together with Andy Pomfret, Dan Jones and Gordon Hamilton. The work of the remuneration committee is covered further in the directors’ remuneration report in the annual report.

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.

Download the Terms of Reference of the remuneration committee. (PDF, 35 KB, opens in a new window)

Nomination Committee

The nomination committee consists of Jonathan Agnew as chairman, together with Dudley Fishburn, Andy Pomfret and Dan Jones. It meets as required and makes recommendations to the board on all board appointments, including the selection of non-executive directors.

Download the Terms of Reference of the nomination committee. (PDF, 46 KB, opens in a new window)

Investment Committee

The investment committee consists of Jonathan Agnew as chairman, together with Andrew Horton, Marty Becker, Neil Maidment, Peter Glynne-Percy (the group’s chief investment officer) and Arthur Manners. The committee makes recommendations to the board regarding the investment policy of the Beazley group and the syndicates, including the establishment of investment guidelines and monitoring of performance and compliance with those guidelines.

Download the Terms of Reference of the investment committee. (PDF, 30 KB, opens in a new window)

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 and the chairman, after the preliminary and interim results. The board is advised of any specific comments from institutional investors to enable them 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.

A resolution was approved at the annual general meeting in May 2007 to allow the company 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, and the statement of directors on going concern can be found in the annual report.

The board confirms that there is a continuous process for identifying, evaluating and managing any compliance issues and significant risks faced by the group. The internal capital assessment (ICA) process maps risks to capital requirements through review and challenge and sign-off 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 parameters 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. Other internal control procedures and reviews for effectiveness by the board include the:

- Preparation of standard monthly, quarterly and periodic reporting as prescribed by the board for review by the various group committees;
- Review of financial, operational and compliance reports from management; and
- Review of any significant issues arising from the external audits.

Further information on the role of the audit committee, go to the audit committee tab. The committee, on behalf of the board, approves the internal audit project 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.

Beazley Group Registered Office Details

Beazley Group plc is a public limited company registered in England and Wales under registered number: 04082477, whose registered address is at Plantation Place South, 60 Great Tower Street, London EC3R 5AD. Please contact us at the address below should you have any queries:

Beazley Group plc
Plantation Place South
60 Great Tower Street
London EC3R 5AD
Tel: +44 (0)20 7667 0623
Fax: +44 (0)20 7674 7100
Email: info@beazley.com

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