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What qualities should a good NED possess?
An insurance NED will need to have extensive technical and managerial experience. They will normally possess a particular expertise, say, as a former (or existing) underwriter, broker, actuary, accountant, lawyer, claims expert, risk manager or Executive Director.
NEDs may be appointed by specific interests, most notably holding companies of subsidiaries or group shareholders, but they cannot be considered genuinely independent.
Sometimes, recognised success in other fields of commercial enterprise or, say, the political or academic world, may qualify for inclusion on a Board as a NED. Ideally, the attributes identified below should also be present.
It should be appreciated that each Executive Director and NED brings expertise to the Board table in his or her particular field. NEDs are not expected to be an expert on every topic, although they do need to be well versed in such matters and to be properly informed.
NEDs will certainly need to be aware of all the duties and responsibilities placed upon them by a variety of regulators or quasi-regulators. They will need to be considered “fit and proper” by the regulatory bodies that approve their appointments.
Both the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) will have regard to a number of factors when assessing the fitness and propriety (Fit and Proper Criteria) of a person to perform a particular Controlled Function. All UK regulators’ assessment criteria relate to the person’s:
In short, NEDs should possess a range of recognisable business qualities that will enable them to add value to a Board of Directors as an individual, while, at the same, contributing to the collective success of the leadership team of an enterprise.
* Key stakeholders are usually regarded as shareholders and capital providers or other investors, as well as customers. However, NEDs have a duty of care to a wider definition of stakeholders, which would include staff and their representatives, brokers (for insurers or underwriters), insurers or underwriters (for brokers), agents and other intermediaries, regulators, franchisors (e.g. the Corporation of Lloyds), and other members of recognisable markets and professional bodies. Under certain circumstances, local communities could even be included, especially when it comes to matters such as corporate social responsibility.
Executive search firm, Per Ardua, have provided a useful overview of the Referencing Criteria for Referees of Aspiring NEDs in insurance.