Investment Committee Mandate
This mandate provides terms of reference for the Investment Committee of each of Economical Mutual Insurance Company (“Economical”), Sonnet Insurance Company, The Missisquoi Insurance Company, Perth Insurance Company, Waterloo Insurance Company and Petline Insurance Company (collectively the “Companies” and individually the “Company”).
The Company’s Board of Directors (the “Board”) has established the Investment Committee (the “Committee”) to assist the Board in fulfilling its oversight responsibilities by gaining and maintaining reasonable assurance in relation to:
- the investment, management and performance of the Company’s assets in compliance with applicable law, including the Insurance Companies Act (Canada) (the “Act”);
- the investment risk management policies and procedures of the Company relating to its investable assets (the "Company Funds"), as embodied in the Company's Investment Policy Statement ("IPS");
- the investment, management and performance of assets held by the Company’s pension plan in accordance with the Statement of Investment Policies and Procedures for the Company’s pension plan (the "SIP&P");
- the selection of, and work performed by, investment managers for the Company and its pension plan(s); and
- any additional duties described herein or as may be delegated to the Committee by the Board from time to time.
members and Conduct
The Board shall appoint a minimum of three directors to be members of the Committee. The members of the Committee will be selected by the Board on the recommendation of the Corporate Governance Committee. Each year, the Board will appoint one member of the Committee to serve as chair of the Committee. If, in any year, the Board does not appoint a chair, the incumbent chair will continue in office until a successor is appointed.
A majority of the members of the Committee will meet the criteria for independence referred to in the Board mandate. In addition, at least a majority of members of the Committee will have the ability to understand the risks and opportunities presented by the portfolio of assets, liabilities and derivatives typically present in large and sophisticated property and casualty insurance companies in Canada, as well as in pension plan portfolios. Members have a duty to immediately notify the chair of the Board if they cease to meet the qualifications for Committee membership for any reason.
Any member may be removed and replaced at any time by the Board, and will automatically cease to be a member as soon as the member ceases to meet the qualifications set out above. The Board will fill vacancies on the Committee by appointment from among qualified members of the Board on the recommendation of the Corporate Governance Committee. If a vacancy exists on the Committee, the remaining members will exercise all of its powers so long as there is a quorum.
The Committee shall conduct itself in accordance with the Committee Operating Procedures prescribed by the Board from time to time. This mandate does not impose on any Committee member a standard of care or diligence that is in any way more onerous or extensive than the standard of care applicable to the Company’s directors generally.
The Committee is responsible for performing the duties set out below as well as any other duties delegated to the Committee by the Board from time to time.
The Committee is responsible for the following:
- Establish an IPS that is intended to support the following objectives:
- meet the Company’s present and anticipated future financial obligations;
- maximize the returns on investments in the Available for Sale ("AFS") portfolio within acceptable risk parameters;
- invest the Held for Trading ("HFT") portfolio to mitigate the Company's profitability against the impact on claims liabilities from changes in interest rates; and
- provide for long-term preservation of capital.
- Approve strategies consistent with the IPS from time to time.
- At least annually:
- review the IPS and, upon agreement, approve such changes to it as may be necessary or advisable; and
- review investment holdings that are significant in terms of amount of exposure, degree of risk or other relevant factors;
- At least quarterly:
- review management’s assessment of the economic, capital markets and regulatory environment and the impact of these influences on the Company’s investment portfolios, strategies and operations;
- review management’s assessment of compliance with the IPS;
- monitor ongoing performance against the annual Investment Plan;
- review investment portfolio and asset/liability performance against approved investment benchmarks and objectives;
- review the credit watch and monitoring lists, together with management’s assessment of provisions for impairment;
- review the performance of the Company’s external portfolio managers and/or investment advisors;
- review net investment transaction and securities lending activity including new issues to the securities portfolios; and
- take measures to re-align investment strategies where appropriate.
- Review and, upon agreement, approve management recommendations relating to the remediation of exceptions to the IPS and proposed transactions that exceed IPS delegated authorities;
- Review any matters raised within the scope of this mandate in connection with any internal audits or regulatory reviews, including management’s responses or recommendations;
- Review and upon agreement, approve management recommendations relating to the selection of the Company’s external portfolio managers and/or investment advisors, and receive a report from management at the next scheduled Committee meeting of any termination or modification by management of the mandate of any of the Company’s external portfolio managers and/or investment advisors.
The Committee shall take such actions as are required to ensure the proper functioning of investment-related activities in respect of the Company’s pension plan, including those listed below; provided that the Committee may, at its discretion, delegate to the Management Pension Committee any of the Committee’s specific responsibilities in relation to the Company’s pension plan, in whole or in part, as it deems appropriate from time to time:
- At least annually:
- meet with the pension actuary to review and confirm its proposed investment- related valuation assumptions for the Company's defined benefit pension plan, and review the subsequent report on the funded status of the plan in order to consider any investment implications;
- review and, upon agreement, approve any changes to the pension plan’s Statement of Investment Policies and Procedures (“SIP&P”); and
- review and change as appropriate the range of investment options available under the Company's defined contribution pension plan, and review and, upon agreement, approve any changes recommended by the Management Pension Committee regarding the investment managers retained for each investment option.
- At least semi-annually review the investment performance of the investment managers for the Company’s defined contribution pension plan.
- At least quarterly:
- review the asset mix and investment performance of the defined benefit pension plan and rebalance as appropriate;
- review the performance of the defined benefit pension plan's external portfolio managers; and
- review the defined benefit plan investment managers’ compliance with the SIP&P.
- Review and upon agreement, approve Management Pension Committee recommendations relating to the selection of the defined benefit pension plan external investment managers and receive a report from the Management Pension Committee at the next scheduled Committee meeting of any termination or modification by management of the mandate of any of the defined benefit pension plan external investment managers (with any such termination or modification to require the prior approval of the Committee chair or the Committee).
- On a routine basis (typically no less frequently than once every 18 months), meet with each of the defined benefit pension plan external investment managers to review past performance and discuss future plans.
- Oversee and periodically assess the quality of the work of investment consultants retained on behalf of the Company or the Committee in relation to the Company’s pension plan.
The Committee will provide oversight over the corporate policies delegated to the Committee by the Board from time to time.
The Committee will regularly report to the Board on, among other matters:
- the performance of the Company’s corporate and pension plan investment portfolios;
- changes to the investment managers retained in relation to the Company’s investment portfolio and/or defined benefit pension plan;
- material changes in the SIP&P, including the range of investment options available under the defined contribution pension plan; and
- all other significant matters it has addressed and with respect to such other matters that are within its responsibilities.
At least annually, the Corporate Governance Committee will review the effectiveness of the Committee in fulfilling the responsibilities and duties set out in this mandate in accordance with the evaluation process approved by the Board.
The Committee will review and assess the adequacy of this mandate at least once every three years and submit it to the Corporate Governance Committee for approval together with amendments as it deems necessary and appropriate. The Corporate Governance Committee will review this mandate and submit it to the Board for approval with such further amendments as it deems necessary and appropriate. Minor technical amendments to this mandate may be made by the corporate secretary of the Company, who will report any such amendments to the Board at its next regular meeting.
Access to Records and Outside Advisors; Reliance on Experts
In carrying out its responsibilities, the Committee:
- is empowered to investigate any matter with full and unrestricted access to all books, records, facilities and personnel of the Company and its subsidiaries;
- may retain, remove, instruct and pay any outside advisor, including independent counsel, at the expense of the Company without Board approval at any time;
- has the sole authority to determine such advisor’s fees and other retention terms;
- may communicate directly and privately with the internal auditor, the external auditor, the Pension Actuary and any other advisor engaged by the Committee or the Company at any time;
- shall be entitled to rely in good faith upon:
- a report or advice of an officer or employee (including the Appointed Actuary) of the Company, where it is reasonable in the circumstances to rely on the report or advice, and
- a report of an actuary, lawyer, accountant, engineer, appraiser or other person whose profession lends credibility to a statement made by such a person.
No Rights Created
This mandate is a statement of broad policies and is intended as a component of the flexible governance framework within which the Board, assisted by its committees, directs the affairs of the Company. While it should be interpreted in the context of all applicable laws, regulations and listing requirements (if any), as well as in the context of the Company’s letters patent and bylaws, it is not intended to establish any legally binding obligations.