Corporate Governance Pactices in Pakistan; A case of Adamjee and Atlas Insurance Limited

1 Fiaz Ahmad , Center for Research and Development Minhaj University Lahore
fiaz.crd@mul.edu.pk
Chapter #4 Filed work Project:
Adamjee Insurance Company LTD
Remuneration of the Members of the Board:
The Board of Directors has approved the remuneration of the members of the Board (non-
executive directors including independent directors) for attending meetings of the Board. The
meeting fee of Rs. 10,000/- per meeting is paid to directors. Travel expenses by air from city of
residence to city of the meeting are paid with hotel accommodation, if availed.
Director Information by Tiers:
Board of Directors: Designation:
Umer Mansha Chairman
Ibrahim Shamsi Director
Imran Maqbool Director
Muhammad Anees Director
Muhammad Arif Hameed Director
Muhammad Umar Virk Director
Shaikh Muhammad Jawed Director
Muhammad Ali Zeb Managing Director & Chief Executive Officer
Board of Directors Composition:
The following were the directors during the year 2018:
Total Number of Directors:
(a) Male 8
(b) Female 0
Composition:
I Independent Director: 1
Muhammad Anees
ii. Other Non-Executive Directors: 6
1. Fredrik Coenrard De Beer
(Resigned 23 February 2018)
2. Ibrahim Shamsi
3. Imran Maqbool

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4. Muhammad Arif Hameed
(Joined 10-5-2018)
5. Muhammad Umar Virk
6. Shaikh Muhammad Jawed
7. Umer Mansha
iii. Executive Director 1
Muhammad Ali Zeb
a) The type of Board it has in term of tenure. Common Tenure Board
a) The type of Board it has in term of levels. One Tier Board
b) How many directors on the Board seem to be there:
Sr.No Description of the Question: Answer:
1 On the basis of their shareholdings alone Yes
2 As representative of the government or a regulatory authority. No
3 As a nominee of a lender. No
4 On the Basis of their ability alone No
5
As representative of minority shareholders, civil society, or other
stakeholders. No
Meetings of the Board:

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Categories of Shareholders: Number of Shares: Stake %:
Directors 152,278 0.044
Chief Executive Officer 7,073 0.002
Executives / Executives' Spouses 104 -

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Atlas Insurance Limited
Directors’ Remuneration
The Board has a formal policy for remuneration of Directors depending upon their responsibility
in affairs of the Company. The remuneration is commensurate with their level of responsibility
and expertise needed to govern the Company successfully and to encourage value addition.
Categories of Shareholders

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Meetings of the Board:
Board of Directors Composition:

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a) The type of Board it has in term of tenure. Common Tenure Board
b) The type of Board it has in term of levels. One Tier Board
c) How many directors on the Board seem to be there:
Sr.No Description of the Question: Answer:
1 On the basis of their shareholdings alone Yes
2 As representative of the government or a regulatory authority. No
3 As a nominee of a lender. No
4 On the Basis of their ability alone No
5 As representative of minority shareholders, civil society, or other
stakeholders.
No

fiaz.crd@mul.edu.pk
Chapter#5 Field work Project:
Adamjee Insurance Company
Q1: What committees have been formed by the company board of director?
1. Audit Committee
2. Ethics, Human Resource and Remuneration Committee
3. Investment Committee
Q2: What function s has been assigned to each of these committees?
Q3: What is the composition of these Committees?
Q4: Do these committee’s issues separate report for the information of shareholders? If so,
are these report made a part of company annual report?
Yes, these committees prepare separate reports after that these report will be the part of the
annual report of the firm.

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Q1: What committees have been formed by the company board of director?
1. Board and Management Committees
2. Audit Committee
3. Ethics, Human Resource and Remuneration Committee
4. Investment Committee
5. Underwriting, Reinsurance and Co-insurance Committee
6. Claims Settlement Committee
7. Risk Management and Compliance Committee
Q2: What function s has been assigned to each of these committees?
Board and Management Committees:
As envisaged by the Code of Corporate Governance for Insurers, 2016, (the Code), the Board has
formed Audit Committee, Ethics, Human Resource & Remuneration Committee and Investment
Committee. The Board has also established management committees namely; Underwriting,
Reinsurance & Co-insurance Committee, Claims Settlement Committee and Risk Management
& Compliance Committee. In addition to the regulatory requirements, the Board has also formed
Information Technology Committee. A Management Committee comprising of all departmental
heads headed by Chief Executive Officer is also in place for operational coordination.
Audit Committee:
The Committee consists of three non-executive directors, presided by an independent director.
The Audit Committee is responsible for assisting the Board in discharging its responsibilities in
relation to the disclosure of the financial affairs of the Company. The Committee focuses in
particular on compliance with accounting policies and ensuring that an effective system of
internal financial control is maintained. The ultimate responsibility for approving the annual and
interim financial statements remains with the Board. The terms of reference of the Audit
Committee have been determined by the Board in accordance with the Code of Corporate
Governance consisting on the following:
 Major judgmental areas;
 significant adjustments resulting from the audit;
 going concern assumption;
 any changes in accounting policies and practices;

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 compliance with applicable accounting standards;
 compliance with these regulations and other statutory and regulatory requirements; and
all related party transactions
Ethics, Human Resource and Remuneration Committee:
The Committee consists of three members. Majority of the members are non-executive directors
including the Chairperson who is also independent director. Committee is responsible for:
• Recommending human resource management policies to the Board;
• Recommending to the Board the selection, evaluation, compensation (including retirement
benefits) and succession planning of the Chief Executive Officer. Recommending to the Board
the selection and evaluation of Chief Financial Officer, Company Secretary, Compliance Officer
And Head of Internal Audit;
Investment Committee:
The Committee consists of five members including three non-executive directors, Chief
Executive Officer and Chief Financial Officer. The primary Responsibility of the Committee is
to assist the Board in discharging its responsibilities in overseeing Company's investment
portfolio, including:
 Developing, reviewing and recommending to the Board investment strategies and
investment guidelines.
 Monitoring management's compliance with the Company's investment strategies and
guidelines.
 Monitoring compliance of the Company's investment policies and practices with
applicable legal and regulatory requirements.
 Reviewing and approving all investment transactions made by the Company.
 Reporting to the Board the Company's investment strategies and guidelines.
Five meetings of the Committee were held during the year.
Underwriting, Reinsurance and Co-insurance Committee:
The Committee consists of three members; chaired by a non-executive director.
Following Terms of Reference (TORs) for the Underwriting, Reinsurance & Co-insurance
Committee have been finalized by the Board:
Advise the Board and management concerning the establishment and review of the Company's
underwriting policies and guidelines.

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Set out the criteria for assessing various types of insurance risks and determine the premium
policy of different insurance covers.
Regularly review the underwriting and premium policies of the Company with regard to relevant
factors such as its business portfolio and the Market development.
Develop the policy for effecting reinsurance, not inconsistent with the relevant provisions of the
Insurance Ordinance, 2000 and shall ensure that adequate reinsurance arrangements are made for
the business of the Company.
Review the reinsurance arrangements from time to time, and subject to the consent of the
participating reinsurers, make appropriate adjustments to the arrangements in the light of the
market development. Assess the effectiveness of the reinsurance program for the future
reference. Four meetings of the Committee were held during the year.
Claims Settlement Committee:
The Committee consists of three members, chaired by a non-executive director. The Committee
devises the claims settling policy of the Company. It oversees the claims position of the
Company and ensures that adequate claims reserves are made. It pays attention to significant
claims cases, which may give rise to a series of claims. The Committee determines the
circumstances under which the claims disputes shall be brought to its attention and decide how to
deal with such claims disputes. Four meetings of the Committee were held during the year
Risk Management and Compliance Committee:
The Committee consists of three members, chaired by the Chief Executive Officer.
Following Terms of Reference (TORs) for the Committee have been finalized by the Board:
Oversee the activities of the risk management function of the Company and shall make
appropriate recommendations to the Board.
 Assist the Board in implementation of the decisions taken by the Board to mitigate
probable risks falling within the purview of the risk management function.
 Monitoring the compliance function and Company's risk profile in respect of compliance
with the laws applicable to it as well as the internal policies and procedure.
 Prepare reports detailing Company's risk profile and the compliance activities undertaken
proactively aiming at determination of the Company's ability to meet its legal and ethical
obligations, as well as report on identified weaknesses, lapses, breaches or violations of

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the areas within its purview and the controls and other measures in place to help detect
and address the same.
 Supervise and monitor matters reported using the Company's Whistle Blowing policy for
employees and others to report compliance concerns or potential breaches, violations or
frauds within the areas under its purview.
Q3: What is the composition of these Committees?

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Q4: Do these committee’s issues separate report for the information of shareholders? If so,
are these report made a part of company annual report?
Yes, these committees prepare separate reports after that these report will be the part of the
annual report of the firm.

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Chapter#6
Q#1 The role of director in general?
 Act within powers
 Promote the success of the company
 Exercise independent judgment
 Exercise reasonable care, skill and diligence
 Avoid conflicts of interest (a conflict situation)
 Not accept benefits from third parties
 Declare interests in proposed or existing transactions or arrangements with the company
Q#2 The difference between the remuneration of executive and non-executive director?
Adamjee Insurance:
The Board of Directors has approved the remuneration of the members of the Board (non-
executive directors including independent directors) for attending meetings of the Board. The
meeting fee of Rs. 10,000/- per meeting is paid to directors. Travel expenses by air from city of
residence to city of the meeting are paid with hotel accommodation, if availed.
Atlas Insurance:
The Board has a formal policy for remuneration of Directors depending upon their responsibility
in affairs of the Company. The remuneration is commensurate with their level of responsibility
and expertise needed to govern the Company successfully and to encourage value addition.
Q#3 How committed are the directors to the cause of good corporate governance?
Corporate boards have many duties and responsibilities. In every decision the board makes, they
must consider how it will affect their employees, customers, suppliers, communities and

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shareholders. Good corporate governance relies on distinct differences in the roles between
board directors and managers. It was never intended for board directors to be directly involved in
the daily operations of a corporation, and they certainly shouldn’t engage in micromanaging the
management. The main role of board directors is oversight and planning. Despite the differences,
board directors may delegate certain powers to the CEO or CFO under certain circumstances.
Q#4 How may INED serve on committees?
Adamjee Insurance:
Adamjee have no Independent None executive director, all the committees consist of
Independent directors and non-executive directors.
Atlas Insurance:
Atlas insurance have no Independent None executive director(INEDs), all the committees
consist of Independent directors and non-executive directors.
Q#5 What feeling do you get about the independence of INEDs?
Both of the firm board of directors have no INEDs but, for the batter working of the company
operations and for the Satisfaction of the stakeholders.

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Chapter#7
Q1: How well the statement has been prepared?
The summary of audit report issued by the independent auditor show that the financial statement
of the company are prepared in compliance with the international financial reporting standards
and also follows the local rules or guideline provided by the SECP for preparing financial
statement.
Q2: How detailed and helpful are the notes to the accounts?
Notes to the accounts are very detailed and giving the proper information about any single entry
or written in the financial statement. The language of the notes to the accounts is very easy that
will be helpful for the investors to understand this statement in very easy manner.
Q3: How Informative and the realistic is the director Reports?
Director reports are also the part of annual report of the company, these report contain the
directors summary of the different operations of the company. The director are also stake holder
of the company and the work for the all other shareholders , there reports matter most to the all
stakeholders and for trust to continue.
Q4: How clean is the audit report?
The audit report of the company shows the integrity, reliability and accuracy of the company.
The cleanness of the audit report is dependent on the process of the auditor appointment and the
audit process. The audit reports of both companies are clean and according to the slandered.
Q5: How different is the composition of assets and liabilities of these Companies?
The composition of the of the financial statement of the both companies are same in format,
showing the data of current year and also two previous years. When we talk about the assets and
the liabilities both of the companies having increasing trend in their assets and the liabilities.
Q6: Dose these reports appear to be capable of fulfilling their three function of
Information, controlling and planning?
Yes, the report of the company shows the brief information about the firms operations, their
future plans and the company management who is performing the controlling function.

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Q7: Is there any evidence of deliberate misstatement/ creative accounting?
No, the audit report of both companies shows that there is no misstatement in the record
provided by the firms.

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Chapter#8
Q#1 How aware are they of the risk faced by their own department and the company?
Insurance firms commonly face all blow mention risk, and the risk management committees are
also aware of these risk
Liquidity Risk:
Liquidity risks may arise due to a large number of clams in general insurance and a large
surrender of policies in life insurance. This may lead to a loss of the company property in
instances when the company may not be able to raise the required cash.
Actuarial Risks:
Actuarial risks may be caused by different factors such as mortality rate variance, perils and
certain variance. Calculations of the given risks may be subjected to a variety of adjustments.
You may consider current statistical data, some past experience and future possibilities but in the
future, there will be a great variance in the speculated and the risks amount.
Reputation Risks:
This has a great impact on the amount of revenue which will be raised by the insurance
company. In the short run, it may not be an easy task to quantify the exact value caused by the
reputation risks but adverse results may pop-up during auditing. In Extreme cases, reputation
risks may lead to bankruptcy.
Business Risks:
Risks ranging from data breaches have resulted in a loss of the great amount of relevant data in
the insurance industry. Other related business insurance risks include human capital loss, loss of
damage and some of the relevant professional service mistakes that may be relevant.
Strategic Risks:
Strategic risks in the insurance sector require excellent strategic management skills to avert risks.
Strategic risks involve the process of identification, assessing and the management of the
insurance strategy.
Underwriting insurance Risks:
Underwritings of risks resulting from the process of selection and approval of which risks need
to be insured. Insurance risks may also be caused by the use of an inflexible underwriting of risks
process. The process of underwriting forms the basis of insurance and the failure to get it right at
this step may result in great loses in the future.

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Q#2 What steps have they, or the company taken, to handle or mitigate these risks?
The companies fallow the three main techniques to mitigate the risk, the techniques are as
follows:
Accept the Risk:
If the risk is a very swear nature then the company try to eliminate it or try to reduce it but
conditions couldn’t apply then the companies accept it.
Avoided the Risk:
Sometime its depend upon the risk type company try to avoid it, through its strategies and enable
to completely avoided it.
Reduce the Risk:
Sometime firms will enable to reduce the risk by applying suitable techniques at suitable time.
Eliminate the Risk:
At once firms will be equipped enough to eliminate the complete risk from the firms.
Q#3 What steps still remain to be taken to make their department even safer?
Both of the firms need to improve their think tanks, to make batter strategies for risk. For this
purpose the firms should have to develop research based market analysis for the forecasting of
risk to make firm form all type of risk.
Q#4 What risk being avoided by the company and what are potential benefits that are
being sacrificed by avoiding these risks?
We have discussed in detail about the different types of risk and how the firms will be able to
avoid all types of risk. But something that firms can miss in avoiding risk is the chances of
growth. If the firm doesn’t take risk they will fail to get high return.
Q#5 What are being retained by the company?
The companies have retained the all types of losses that cause the high risk to the firm and save
the firm from huge loss in the form of market share and market performance.
Q#6 What is the company chosen to retain these risks?
Its depend upon the firm strategies that what the firm want either the firm is following risk bearer
strategy or risk avoiding strategy. If the firm is following the risk avoiding strategy then firm
save the huge amount of money and market reputation etc.

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Chapter#9
Q#1 If has a formalized system of internal control, carefully evaluate its effectiveness. If
you find any weak areas in the present system, tabulate these weaknesses. Fir each such
weakness, list the possible losses that may arise three-from. Also suggest ways and means to
removing weaknesses from the system?
Yes, both of the firm has the formalized system of internal control and they make sure the
effectiveness of the internal control by conducting internal audit as well as external audit. This
leads both firms to grow at fast track and achieve high revenues by control their day to day
operations. They evaluate the system by conducting annual performance of departments and
employees as well.
Q#2 If your company does not have a formal system, of internal control, write a
memorandum of your CEO, outlining a need for, and advantage to be gained from, having
such a formalized system. Also provide him with a list of steps that need to be taken
regard?
Yes, both of the firms have proper system of internal control and to measure the efficiency of
that control by using different technique of evaluation. The internal control is maintained by
making different committees of board of directors that govern the operation of the firm and it’s
managing the working.

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Corporate Governance Pactices in Pakistan; A case of Adamjee and Atlas Insurance Limited