Denmark’s financial watchdog has told the country’s pension providers and insurers they should improve their management systems, particularly around conflicts of interest.
The Danish FSA (Finanstilsynet) released its assessment this morning of how well management systems work at insurance companies – including pension firms – following up on the questionnaire sent out to the sector at the end of 2020 in its annual Christmas letter (julebrev).
The FSA said: “The study shows that the companies generally have well-described management systems. However, there is a need for improvements, including increased attention to conflicts of interest.”
Insurance companies had to have well-functioning and efficient management systems, the authority said, as failure in a management system could lead to failure to manage risks to which the company and customers were exposed.
Carsten Brogaard, the FSA’s deputy director in charge of supervision of insurance and pension companies, said it was positive that firms had well-described management systems.
“Through our inspection work, however, we see that the companies’ management systems are not always as well-functioning as the impression the companies’ descriptions and answers may give,” he said.
The authority expected these supervised entities to document to a greater extent that in practice, their key functions in practice were more than just formal measures, he said, adding that the functions had to work effectively and support appropriate and responsible management.
“It requires high organisational anchoring and resources,” Brogaard said.
The Copenhagen-based financial supervisor said its investigation had also shown that a number of firms had not taken an adequate position on conflicts of interest.
“The companies have generally not documented how they handle conflicts of interest if they judge that the same person must take on several roles in the company,” the FSA said.
Brogaard said the FSA’s survey showed that the firms had to pay more attention to handling conflicts of interest.
“It is worrying that several companies have replied that mixing responsibilities does not lead to conflicts of interest,” he said, adding that looking ahead, this was an area the FSA would focus on in its ongoing supervisory work.
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