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Corporate Governance in Europe: a general overview (*)

Paolo Montalenti, Ordinario di Diritto commerciale, Università degli Studi di Torino.

The paper analyzes the problem of Corporate Governance in Europe in Insurance Law.

The a. draws an overview of the relationship between harmonization and regulatory competition in Corporate and Securities Law and offers an outline of the general questions of Corporate Governance transparency and of managerial duties in European Insurance law.

He concludes with the analysis of the Italian Case with reference to the Board of Directors and the monitoring systems, with a particular focus on IVASS Regulations.

PAROLE CHIAVE: diritto assicurazioni - corporate governance - valori mobiliari - diritto societario europeo - monitoraggio

Diritto delle assicurazioni e Corporate Governance in Europa: profili generali

L’articolo analizza la questione della corporate governance in Europa nel diritto delle assicurazioni.

il contributo traccia una panoramica del rapporto tra armonizzazione e concorrenza normativa nel diritto societario e dei valori mobiliari e offre una panoramica delle questioni generali di tra­spa­ren­za della corporate governance e dei doveri manageriali nel diritto assicurativo europeo. Conclude con l’analisi del Caso Italiano con riferimento al Consiglio di Amministrazione e ai sistemi di monitoraggio, con un particolare focus sul Regolamento IVASS.


1. Corporate Governance and Modern Enterprises - 2. Harmonization and Regulatory Competition in Corporate and Securities Law [1] - 2.2. United States and Europe: Recent Developments - 2.3. European Corporate Law and Harmonization: light and shade - 2.4. European Corporate Law and Regulatory Competition - 2.5. European Securities Law: slow harmonization - 2.6. European Corporate Law: Perspectives - 3. Insurance Law between State Rules and Globalization - 3.2. Corporate Governance and Transparency - 3.3. Corporate Governance: Transparency and Managerial Duties - 3.4. Corporate Governance: Transparency and Monitoring Duties - 3.5. Corporate Governance and Insurance Companies: Supervision and European Rules - 4. Corporate Governance, Management and Monitoring Systems in Insurance Law [22]. The Italian Case - 4.1. History. The ISVAP Rules - 4.2. The ISVAP/IVASS Rules on Monitoring System - 4.3. Information: Supervisory Body and Board of Directors - 4.4. Risk Management - 4.5. Groups. Corporate Law and IVASS Rules. The IVASS Regulation n. 38/2018 - 4.6. Corporate Governance Rules: Individual Companies and Groups. Conclusions - 5. European Corporate and Insurance Law: a general overview - NOTE

1. Corporate Governance and Modern Enterprises

The evolution of corporate governance in all jurisdictions and in the international debate is constant. The generality of the expression “corporate governance” – although commonly used in all systems – underlies a variety of meanings. In a narrower, but not less meaningful, sense, corporate governance means the set of rules relating to the management of companies, with particular reference to the problem of balance between administration, on the one hand, and supervision and control, on the other hand. A broader concept includes the wider (and problematic) field of the rules intended to efficiently allocate the control of companies, guarantee adequate protection to the interests of investors, and ensure a correct, transparent and effective conduct of management of widely-held companies with a broad shareholders’ base: these are topics of particular interest to insurance companies. The issue of corporate governance in insurance companies is part of the more general framework of the dialectic between harmonization and regulatory competition both in European law and in the US and other jurisdictions.

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2. Harmonization and Regulatory Competition in Corporate and Securities Law [1]

2.1. The Origins With regards to harmonization and regulatory competition, by way of a rough simplification, we can identify two “historical” stages in the United States and European systems. Traditionally, in the United States, Corporate Law was assigned to state law – principle additionally strengthened by the incorporation doctrine – while securities law was governed by federal law [2]. On the other hand, in Europe, Corporate Law was built around the real seat doctrine with, nonetheless, a slight federal orientation (by reason of the harmonization process through the Directives), while securities law was left to domestic regulations.

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2.2. United States and Europe: Recent Developments

Today, we can report a phenomenon of partial and relative convergence between the two systems. On one hand, the United States, with the Sarbanes − Oxley Act of 2001 and, later, with the Dodd Frank Act of 2010, introduced a number of uniform federal-based corporate rules. On the other hand, in Europe, the Centros judgment and the partial overcoming of the real seat doctrine triggered a modest regulatory competition phenomenon. Contrariwise, with the Directives on markets in financial instruments issued as of 2003 onwards, even securities law began to undertake the path of harmonization. In conclusion, it can be said that the European and U.S. legal systems are currently undergoing a moderate process of convergence.

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2.3. European Corporate Law and Harmonization: light and shade

The interpretation scheme proposed – resulting from an extreme simplification − requires, at least, some further detail. It is undeniable that with regards to a number of relevant topic areas, corporate law in Europe has undergone a process of harmonization [3]. Through the Directives, a significant degree of uniformity has been achieved: from the First Directive on the incorporation of public limited companies to the Second Directive on share capital (now amended), to the Fourth and Seventh Directive on annual accounts and consolidated annual accounts; from the Third and Sixth Directive on mergers and demergers to the Eighth Directive on statutory audits of accounting documents and to the Tenth Directive on cross-border mergers, national Corporate Laws have reached a significant level of uniformity [4]. Furthermore, an attempt to also harmonize the systems of governance was made with the European Company Regulation, which introduced the possibility to choose between a one-tier and a two-tier model of management and supervision. This trend towards a uniform Corporate Law also emerges from the national legislators’ tendency towards comparative perspectives. A significant example is the Italian 2003 Corporate Law reform, which introduced, alongside the traditional model, two alternative systems of governance: the two-tier system [5] and the one-tier system. Another example can be drawn from the Spanish regulation, which, with the Corporate Law amendments of 2014 (Ley 3/12/2014), introduced the business judgment rule. Finally, a significant drive towards harmonization was imprinted, in respect of listed companies, with the Corporate Governance Code: an evidence of the far from secondary role of self-regulation [6]. On the other hand, there are broad areas of Corporate Law with regards to which the process of harmonization has stalled. For instance, the work of the High Level Group of Company Law Experts for the establishment of a level playing field inspired by the “one share-one vote principle”, which has failed to achieve significant results: in particular, on this issue, I would like to point out that the matter of pyramidal groups and Control Enhancement Mechanisms (voting trusts, multiple voting shares, etc.) has officially remained within the scope of domestic legislation [7]. Another matter that still has not been subject to harmonization is corporate governance (in its stricter meaning): [continua ..]

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2.4. European Corporate Law and Regulatory Competition

The European Court of Justice, as of the Centros Judgment issued in 1999 [11], marked a turning point in favor of regulatory competition, with the transition from the real seat doctrine to the incorporation doctrine, further reinforced with the subsequent judgments in the Überseering and Inspire Art cases. Companies may now be incorporated in a country different from the one in which they conduct their business activities. However, the Court’s case-law gives rise to two rather delicate problems of interpretation. The above-mentioned decisions open to the possibility for domestic legislations to ban conducts that can be qualified as abuse of rights, provided that the restrictions are not discriminatory, respond to a public interest, are effective in the pursuit of the predetermined objective, and do not carry disproportionate effects. Thus, the question arising is whether the restrictions must be express or whether they can be inferred from the system, and, consequently, what public interests are eligible to legitimate such restrictions [12]; a significant issue, in practice, with regards to tax law and, even if to a lesser extent, to labor law [13]. Moreover, in terms of assessment, it is a matter of understanding whether regulatory competition encourages a virtuous phenomenon of progressive adaptation to the rules that are mostly appreciated by companies and the market (“race to the top”) or whether it induces a dangerous drift to a “race to the bottom”. It is my belief that a limited competition phenomenon – framed within the guiding principles of the directives, and not a “wild” competition, in accordance with the theories (later to be disowned) of Easterbrook and Fischel – may produce positive outcomes. The case of multiple voting shares, in my opinion, serves as evidence.

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2.5. European Securities Law: slow harmonization

European Securities Law has struggled slightly more to undertake the path of harmonization. However, with the directives on insider trading (January 28 2003, No 2003/6 and current), the Prospectus directive (November 4 2003, No 2003/71), the MiFID directive (Markets in Financial Instruments Directive), the Transparency directive (December 15 2004, No 2004/109) and finally the directive on takeover bids (April 21 2004, No 2004/25), significant progress has been made. Among the most recent regulatory interventions I recall the Regulation (EC) No 1060/2009, approved with Directive 2013/EU of May 21 2013, which assigned to ESMA the supervision of credit rating agencies and introduced innovative provisions on the civil liability of such agencies [14]. I also recall Directive 2014/65/EU of May 15 2014 on markets in financial instruments, and Regulation (EU) No 596/2014 of April 16 2014 on market abuse, which should enable to clearly distinguish crimes from administrative offences in this delicate subject [15]. It is also true, nonetheless, that the harmonization process is complex and still partial: consider the Thirteenth Directive on take-over bids and the compromise in the matter of reciprocity, principle that also operates at the European level and not only in respect of other legal systems, such as the U.S. system where, in effect, the margin for defense mechanisms exercised not by the Shareholders but by the Board is extremely broad. Furthermore, under the aspect of a supranational regulation of the markets, the goal of an European Supervisory Authority for the Financial Markets is yet to be accomplished, even if significant steps have been made to improve coordination between national supervisory authorities. More advanced is the process of standardization in banking regulation [16], where the centralized supervision of the European Central bank, even if with the cooperation of the national Central Banks, is now almost entirely operational.

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2.6. European Corporate Law: Perspectives

Harmonization or competition between legal systems? I believe than even after the Centros case (and the subsequent EU case-law) harmonization prevails, and not so much or not only in terms of a “quantitative” predominant standardization, but rather because regulatory competition is a drive to uniformity. The Gmbh amendments in Germany are a result of regulatory competition, carried out by granting German firms the possibility to opt for a UK law limited company model in order to benefit from the absence of minimum share capital requirements; the introduction of multiple voting rights in Italy, as seen earlier, also serves as evidence. Thus, there is a progressive osmosis between national laws, operating through: (i) the harmonization of the directives; (ii) the Court of Justice case-law; (iii) the use of comparative law in the interpretation of domestic rules, in compliance with the terms (and limits) indicated above; and (iv) the voluntary adaptation of national laws to similar rules and principles. The Action Plan 2013-2015 provides for the introduction of a directive on corporate groups, essentially aiming to find a codified balance between the validity of pursuing a group interest and the protection of the corporate interest (and in particular of the outside shareholders and creditors) of each individual company. On this matter, Italian regulation on the abuse of unitary management, focusing on the so-called compensatory benefits criteria [17] could represent a significant point of reference, sharing, moreover, similarities with other countries (see the so-called Rozenblum doctrine in France). The EU legislator is also oriented towards other objectives. The proposal for a directive of the Commission dated April 10, 2014, for the introduction of a Societas Unius Personae (SUP), which reduces minimum share capital requirements (at least 1 EUR), strictly indicates the decisions to be made by the single-member, but with the power to give instructions to the directors, and with no particular restraints on management, may be a useful instrument for both the individual limited company and the company as part of a group [18]. The implementation of Directive 2017/828/CE of 17 May 2017 (the so-called Shareholders’ Rights Directive 2) amending Directive 2007/36/CE in order to encourage the long-term commitment of shareholders, may be a useful means of developing a more effective dialogue between institutional investors and [continua ..]

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3. Insurance Law between State Rules and Globalization

3.1. General Profiles Insurance law is sometimes considered a “sectorial system rule” characterized by strong elements of specialty and almost locked up in a “hortus clausus” reserved to experts interested in the subject. In short, a sort of territory reserved to experts, somehow marginal compared to other segments of the legal system. This is a fallacious categorisation of insurance law, that as confirmed by several examples relating to corporate governance issues, has a general and systematic value that must be properly appreciated. With regard to insurance contracts, there is a general problem in all legal systems, not only in Europe (for example also in South America): what is the relationship between “special clauses” [20] with general character, that is, first of all, the protection clauses dictated by consumer law, and the “special sector” clauses or the “consumer-insured” protection clauses and what is the relationship between them and the general clauses of contract rules (good faith etc.). The theme is particularly relevant because, even in the presence of numerous and sometimes redundant regulatory requirements, the solution of the problems often rests, in the last instance, on the general clauses of diligence and fairness in the execution of the contract, demonstrating that the excess of analytic rules must be corrected going back to general principles. Consider, secondly, the subject of supervision. In this field there are questions that interest not only specialists but also the whole of civil society: it is singular that the focus is mainly on the problem of banking supervision, at the European level, while the question arises with similar relevance also in the sector of Insurance Law. Finally, consider EU legislation, where the right of establishment (Article 49 TFEU) and the freedom to provide services (LPS) assume, according to the communis opinio, constitutional value and have found a progressive and increasingly precise implementation in the field of insurances law in the transition from the first Directive, all played on the establishment, to the successive Directives, aimed at guaranteeing the LPS with a view to the creation of a single European market for insurance services. With regard to corporate governance, it should be noted that significant contributions to the evolution of the system, with an expansive view of the special law on the general Corporate Law, [continua ..]

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3.2. Corporate Governance and Transparency

Corporate Governance in insurance companies is a common theme that unifies many of the abovementioned general topics, both because it constitutes the precondition for a correct exercise of insurance activity and because, in many legal systems, the rules introduced have represented an advanced point of reference for the regulation of the matter also in non-insurance companies, especially if listed on the stock exchange: such as composition of the Board of Directors, role of independent directors, regulation of conflicts of interest and transactions with related parties, internal audit, risk management, compliance procedures, all essential elements that contribute to the creation of preventive barriers to avoid or mitigate the risk of violation of law, fraud and other financial risks. Furthermore, the information and therefore the transparency in the Board meetings represent not only an element of the general duty of correct management but the very essence of the exercise of the management function.

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3.3. Corporate Governance: Transparency and Managerial Duties

With regard to the governance of the company, it can be observed that in the main legal systems information and transparency play a central role, both as a criterion for good managers and a tool for “traceability” of behaviors, and as a means of ex post monitoring of liability profiles. For example, in Italian law, the duty to “act in an informed way” (Article 2381, paragraph 6, of the Italian Civil Code) becomes a general paradigm of behavior of the good director. Consider the obligation of the chairman to ensure that “adequate information” is provided to the board (article 2381, paragraph 1 Italian Civil Law); the periodic report due by the executive directors to the board (article 2381, paragraph 5); the function central information assignment as a tool for assessing both the organizational structures and the general management trend (Article 2381, paragraph 3); powers and duties of information of directors, whose limit is marked by the Board of directors formal meeting (Article 2381, paragraph 6); information obligations regarding transactions with directors involved (Article 2391); transactions with related parties (Article 2391-bis); transactions motivated by group reasons (Article 2497-ter); leveraged buyout (Article 2501-bis, paragraph 3) and so on. The lack of information is, even, an independent reason for challenging the decision taken in the presence of directors involved (Article 2391, paragraph 2). In the objective complexity of large modern enterprises, particularly in the insurance industry, management, even if hierarchically organized, is strongly articulated and widespread, so it can be said that even the “supreme direction of the business” is expressed, on the one hand, in general guidelines, and on the other hand in the verification of the efficiency and effectiveness of the action of other parties (delegated bodies, senior management, managers, sector managers, directors of subsidiaries, etc.): again the “information process” plays an essential role. In the model of the monitoring board (Eisenberg) directors will have to examine the documents received, evaluate their completeness, sufficiency, comprehensibility, adequacy, for the purpose of the exercise aware of the power and, where necessary, request additional information or integrative. These principles, through the globalization of markets and the self-regulatory codes of the main regulated markets, are, albeit with [continua ..]

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3.4. Corporate Governance: Transparency and Monitoring Duties

Similar considerations can be made in relation to the control and monitoring function. The 2003 Italian corporate law reform elevated the duty of care to a general clause for the behavior of directors (pursuant to Article 2403 of the Civil Code), previously expressly contemplated only for listed companies [arg. ex art. 149, lett. b), t.u.f.]. Control is emancipated from the traditional meaning of “ex post verification” (a derivative of administrative law) and evolves into a coexisting element of the operation of the company and of the management power, intrinsic to the management function; axiologically, the notion should evolve from a conception of control as “cost” to the idea of control as “opportunity”. The central element of monitoring on the fulfillment of the duty of care is represented by the control over the adequacy of the organizational structures, that is the control over the suitability of the entire system of an organization and in particular of the procedural control system, from risk monitoring (so-called risk management) to verify compliance with the regulatory, primary and secondary rules (so-called compliance function): a control, therefore, eminently carried out on the information documents and on the procedures. The distinction between direct control and indirect control is also essential: a bipartition that crosses internal bodies and functions transversely, but which sees, in the socio-economic type, the clear prevalence of indirect controls on direct controls. In the control procedures, many applications proceed not directly to direct inspection but to investigations at the “lower instances” aimed at verifying the correct performance of the control procedures and the adequacy of the organizational structures of which the procedures are integral parts. Indirect controls, precisely because they are complex and widespread, contain in themselves greater resources of feedback and therefore of “self-correction”, but, precisely because they are based on direct controls (so-called “line controls”), they also risk “ chain default “in case of lack or ineffectiveness of these and therefore require a special supervision through the establishment of an appropriate system of “controllers of controllers”: the role of information becomes the keystone of the system. The proper exercise of supervision is based on an adequate procedural system of [continua ..]

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3.5. Corporate Governance and Insurance Companies: Supervision and European Rules

Also in terms of supervision, attention has generally been focused on the issue of the European Banking Union and the single supervision, but the subject presents similar profiles of equal importance also in the insurance sector. The formal adoption of the Omnibus Directive 2, on which the legislators of the Member States found a political agreement in November 2013, marks the transition to the new prudential rules in the insurance field. The regulatory framework called Solvency 2 has been applied since 1 January 2016. The aim of the new regulation is to increase the effectiveness of supervision. In particular, indicators of the implicit risk will be introduced in each asset and liability item, in order to increase the timeliness of the interventions and higher governance standards to guarantee an effective internal risk management as a first condition for the solvency of the companies. In this matter EIOPA (European Insurance and Employment Pensions Association) has developed guidelines that the Italian Supervisory Authority, IVASS, has decided to incorporate in order to favor a progressive adaptation to the new regime. In particular, insurance companies are required to make changes to the corporate governance structures, with regard to the prospective valuation of the risks of capital planning and reporting. In this context IVASS is providing a “Guide to supervision” based on an interactive and integrated supervisory control process (Supervisory Review Process SRP) aimed at expressing a motivated judgment on the company’s risk. In the future risk-oriented perspective, supervision of the adequacy of the assets and the governance system of insurance companies will assume a central importance. The Authority also intends to promote two projects with a view to protecting the consumer: the survey on the actual Motor TPL premiums (IPER), a quarterly sample survey with statistical purposes carried out with the cooperation of all companies and ANIA, a single initiative in Europe; the creation of the integrated anti-fraud archive AIA. Given the importance of the insurance market, that is an integral part of the financial market, the European standardization of supervision certainly constitutes a significant element in the globalization of rules, at least at the level of the federal system.

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4. Corporate Governance, Management and Monitoring Systems in Insurance Law [22]. The Italian Case

After this general portrait of the evolution of corporate and financial law in Europe, with some reference to the United States experience, we can now illustrate certain European experiences in the field of Corporate Governance of insurance companies, also in light of the reports prepared by the AIDA National Chapters. We will mainly focus on some jurisdictions – Italy, Germany, United Kingdom and Russia – but certain remarks will also be based on the reports submitted by other European chapters.

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4.1. History. The ISVAP Rules

In the Italian legal system, the insurance regulation has developed over the years, especially for the evolution of the secondary regulation issued by the insurance supervisory Authority, i.e. the Institute for Insurance Supervision, originally called ISVAP and now, since 2013, IVASS. The original reference point is represented by ISVAP Regulation, March 26, 2008, no. 20, as amended by ISVAP Instruction, 8 November 2012, n. 3020, which regulated the subject with particular analytics, closely linking – in terms of internal controls, system components, information flows, risk management, outsourcing – the company rules with the regulatory precepts and deals with a specific provision (Article 17), the theme – of general systematic importance – of the coordination between supervisory bodies entrusted to a regulation of the board of directors. More precisely, the law anticipated the Corporate Governance Code of Borsa Italiana S.p.A. expressly providing that “Board of Directors defines and formalizes the links between the various functions to which control tasks are assigned”. The rule therefore refers to the private autonomy the solution of one of the most sensitive problems in the matter of management and monitoring, an area of company law on which the serious question hangs if the plurality of control requests stimulates virtuous synergies or produces inefficient overlaps or duplications. Indeed, the virtuous combination of private autonomy, secondary rules, primary rules can allow – if equilibrium is reached – the realization of an effective regulation, as happened for certain profiles, such as, for example, the matter of related parties’ transactions.

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4.2. The ISVAP/IVASS Rules on Monitoring System

The IVASS rules dictated a complex discipline of the internal monitoring system. First of all, the general principles have been clarified (Chapter II, Section I, ISVAP Regulation 20/2008 now further expanded in IVASS Regulation 38 of 3 July 2018laying down specific provisions on the system of governance) anticipating some objectives that we now find both in Bank of Italy rules and in the Self-Regulatory Code, specifying that the system must guarantee “the efficiency and effectiveness of company processes, the adequate control of risks, the reliability and integrity of accounting and management information, the safeguarding of assets and compliance of the company’s activities with current regulations; to company directives and procedures “(Article 4); objectives that recall the functions of risk management, audit, and compliance, today revenue, if one may say so, in the common vocabulary. The regulation in question contains numerous, analytical provisions aimed at regulating the role of corporate bodies. Having specified the top management responsibility of the administrative body (Article 5, 1st co.), the regulation specifies analytically “the strategic and organizational tasks referred to in Article 2381 of the Italian Civil Code”, with useful clarifications on the operative plan because not necessarily configurable ictu oculi as included in the general precept [23]. It then settled – with ISVAP Provision n. 3020/2012 still in force, but now within the overall framework of IVASS Regulation 38/2018– that the administrative body can provide adequate contingency plans (so-called “contingency arrangements”) if it decides to take the delegated powers to itself [art. 5, paragraph 2, letter c)]. The Internal Control Committee (Article 6), the duties of the control body (Article 8), and the functions of senior management (Article 7) have been expressly regulated. The regulation (Article 10) imposed the promotion of the culture of internal control as a tool to “streamline” the system in terms of adequate staff preparation, effectiveness in carrying out the control activity, compliance with the ethical and legal standards [24].

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4.3. Information: Supervisory Body and Board of Directors

Specific procedures (such as “double signature mechanisms, authorizations, verifications and comparisons, checklists and reconciliation of accounts” are also envisaged (Article 11), in order to build an efficient check and balance system. The procedures relating to information flows and communication channels have been regulated in detail (Article 12), specifying the distinguishing features of the principles to which the information system must inspire, namely the principles of accuracy, completeness, timeliness, consistency, transparency and relevance. Having established the general principle of cooperation between bodies and between “all the structures that perform control functions” (Article 8, 2nd co., Reg.), the regulation in question has established specific obligations of collaboration with the auditing company and with the control bodies of other group companies – rules already contained in the legislative provision – but, above all, imposes an obligation of active dialectic relationship with the Board of Directors which, in the light of experience, seems particularly relevant. Article. 8, 3rd co., Lett. f), establishes that the monitoring body “reports to the administrative body any anomalies or weaknesses in the organizational structure and the internal control system, indicating and underlining suitable corrective measures”. Practical experience teaches us how frequent it is not so much the lack of detection of criticality as the non-timeliness of the signaling and the consequent delay of the reactive measures. A systematic indication that should be, as I will say at the end, resumed at the level of primary legislation by imposing on the monitoring body a periodic reporting obligation to the Board of Directors to establish an effective operational link between control and management.

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4.4. Risk Management

The risk management theme is now at the center of the “governance rules” of the secondary discipline in the banking sector and of the Corporate Governance Code, and, in an anticipatory perspective, was covered in the ISVAP / IVASS Regulations under the profile of the objectives, the type of risks, the procedural techniques [25]. The procedural methodology (Article 19) is also regulated, specifying the type of analysis process, the risk measurement techniques, the inclusion of the risk policy in an integrated view with the adoption of asset-liability management models [26]. Transposing the results acquired by the business sciences but not always adequately metabolized in practice, both the risk management function (Article 21) and the compliance function (Article 22) are regulated from an organizational and functional standpoint.

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4.5. Groups. Corporate Law and IVASS Rules. The IVASS Regulation n. 38/2018

The ordinary corporate law nowadays includes a discipline on groups of companies, more precisely the liability for management and coordination (Article 2497 of the Civil Code) from which it is clear that the holding company is entitled to exercise a conditioning and addressing activity, in the unified logic of the group, towards the single subsidiaries. With a precise parallelism with the banking system and, in particular, with the discipline of unitary management according to the stability of the group (see Article 61, paragraph 4 of Legislative Decree 385/1993), the ISVAP Regulation declines the role of the parent company as part of the monitoring of risks and control procedures. In conclusion, from what has been illustrated, it can be said that insurance law represented, in Italian law, a precise reference in the field of corporate governance by providing valuable indications for other regulatory sources from the Corporate Governance Code to the most recent banking provisions on corporate governance (Bank of Italy, Supervisory Provisions, Circular 285, 17 December 2013, First Update of 6 May 2014, Part One – Transposition in Italy of CRD IV, Title IV, Corporate governance, internal controls, management of risks, Chapter 1 – Corporate Governance) and which could also be taken into consideration by the legislator for a desirable reform of the matter in common-corporate law. The subject has had a recent evolution: the IVASS Regulation n. 38 of 3 July 2018, which reorganized the entire subject with a strong systematic approach, articulated numerous provisions (consisting of 97 articles), developing in a more analytical and structured way what already regulated in the 2008/2012 Regulation. The rules relating to the role of the corporate bodies are set forth in art. 5 ss. From the management of the capital (articles 23 and 24) to the requisites of professionalism, integrity and independence (article 25), to the analytical discipline of the fundamental corporate functions (risk management, compliance, auditing, actuarial function).

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4.6. Corporate Governance Rules: Individual Companies and Groups. Conclusions

A topic of particular interest for the centrality in the system is represented by the rules of Title III dedicated to the Corporate Governance Rules with reference to the individual company (Title III, Article 10 ss. and the Group Part III, Article 70 ss.). In particular, I would like to point out, above all, the rule that states that “the supervisory body reports to the administrative body any anomalies or weaknesses in the organizational structure and the corporate governance system, indicating and requesting suitable corrective measures; during the mandate it plans and carries out periodic supervisory interventions, also coordinating with the auditing company, to ascertain whether the shortcomings or anomalies reported have been exceeded and whether, with respect to what was verified at the beginning of the mandate, significant changes have been made to the operations of the company that require an adaptation of the organizational structure and the corporate governance system” [so art. 8, paragraph 3, lett. f)]. The rule is reproduced with the appropriate variations concerning groups [art. 74, paragraph 3, lett. f)] [27]. This is another example of systematic indications worthy of extension also to general corporate law.

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5. European Corporate and Insurance Law: a general overview

Traditionally, as mentioned in the introduction, in Europe, company law was harmonized through the EU Directives; financial markets regulation was entrusted to State law. On the contrary in the United States the system was governed by opposing principles: company law was entrusted to State law, financial markets regulation to federal law. Today we can report that the European and U.S. legal systems are currently undergoing a moderate process of convergence. Insurance Law has recorded recent developments towards a European harmonization. On the one hand through the implementation of Solvency II and, in particular, with respect to corporate governance through the activity of Eiopa with the enactment of Guide Lines; on the other side through the common evolution of national systems. Since many insurance companies are listed companies an important role was played by the codes of self-regulations. Since the Cadbury Code of 1999 adopted in Great Britain, enforced by the principle «comply or explain», all European stock exchanges have adopted self-regulatory Codes with similar principles in the field of (i) the role of Directors, (ii) Internal control functions, (iii) Risk management. In insurance matters, beyond national differences, the common points can be summarized as follows: i) Fitness and Property of Board Members; ii) Centrality of monitoring functions; iii) Enhanced Risk management role; iv) Increased relevance of Corporate Social Responsibility. We have several examples. As described above, in Italy IVASS Regulation 38/2018 introduced innovative rules for the coordination between the monitoring body and the Board in order to report anomalies and to react promptly in order to introduce suitable corrective measures. In Germany, the obligation to carry out the four main functions – independent risk management function, compliance function, actuarial function and audit function – is the exclusive feature of the insurance (and banking) area. Moreover, in 2017, German legislation transposed the European directive on CSR. In Great Britain the rules of the Supervisory Regulatory Authority (PRA) (currently Bank of England) and the rules and guidelines of the Financial Conduct Authority (FCA) require insurers to maintain effective systems of governance and Risk key functions of management, suitability and correctness of the board of directors, role of non-executive directors, rules of conduct (imposed by PRA), rules [continua ..]

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