Corporate Governance Policy

This policy establishes the framework and operational policy underpinning the basic views on corporate governance of the Sompo Holdings Group (hereinafter “the Group”).

1. Basic Views on Corporate Governance

We will at all times carefully consider the interests of our customers when making decisions that shape our business. We will strive to contribute to the security, health, and wellbeing of our customers and society as a whole by providing insurance and related services of the highest quality possible.
Following the principles of the Group management philosophy, the Group considers value creation for stakeholders in the administration of its business and maintains and enforces the Group Action Guidelines as the standard of behavior for the Group employees in Japan and worldwide with the business objectives of realizing sustainable business growth to increase corporate value and fulfilling its mission to be the best customer service provider both at home and abroad.
The Group considers continually improving the transparency and fairness of the Group’s corporate governance and fulfilling its corporate social responsibility as essential to maintaining strong relations of trust with stakeholders. The Board of Directors has accordingly established the Corporate Governance Policy to clarify basic policies regarding the formation of the overall vision for the governance structure and the governance framework. We continue to improve our corporate governance and aim to establish optimal systems.

2. Overall Governance Organization

The Company has elected to change its governance structure to "Company with committees" as of June 2019 as a part of the efforts to strengthen corporate governance structure by separating management supervision from business execution in order to reinforce the supervisory function of the Board of Directors and to accelerate business execution by delegating substantial authorities from the Board of Directors to executive functions The Company also established three committees; Nomination Committee, Audit Committee and Compensation Committees, to enhance the governance structure transparency and fairness practice.
The Board of Directors sets the basic management policy and the basic policy for internal control which forms the foundation of the Group management, appoints executive officers and provides supervision over the performance of duties by directors and executive officers. Additionally, the Board of Directors delegates executive decisions to executive officers in principle, as long as laws permit, for further strengthening the supervisory function of the Board of Directors and further accelerating business execution simultaneously.
In addition, by appropriately executing the duties of the Nominating Committee, Audit Committee, and Compensation Committee, which have the chairman and a majority of its members as outside directors, the Company ensures transparency in the appointment of directors and executive officers, the audit of their duties, and also the treatment of directors and executive officers to control and maintain the structure of corporate governance for proper and more efficient function.
On the executive side of the structure, executive officers make executive decisions and perform duties on the matters delegated from the Board of Directors under the comprehensive supervision by the Group CEO and the Group COO, while business owner system and Group Chief Officer (hereinafter “Group CxO”) system are in place to ensure agile and flexible decision-making and duty practice, with clearly defined authorities and responsibilities.
Additionally, the Company established the highest executive committee, the Global Executive Committee (hereinafter “Global ExCo”), as an advisory body to Group CEO to discuss themes that significantly impact group-wide management strategy as well as business executive policy. The Company also established Managerial Administrative Committee (hereinafter “MAC”) to discuss important matters related to execution of business strategies and managerial administrative matters of the Company and Group Companies.

3. Board of Directors and Committees

(1) Directors and the Board of Directors

a. Role of Directors and the Board of Directors
The Board of Directors performs its duties as stipulated by law or the Articles of Incorporation establish important items for management defined in the Rules of Board of Directors, and serve a supervisory function overseeing the conditions of business executions.
The chairman of the Board of Directors is appointed at the Board of Directors Meeting as is stipulated in the Articles of Incorporation, which is conducted by the director who serves as Group CEO.
Prior to the Board of Directors Meeting, preliminary briefing sessions are held for outside directors before every meeting to explain about the agenda items. The opinions, questions, and other comments expressed by the outside directors at the preliminary briefing sessions are shared with all attending Directors before the Board of Directors Meeting, to operate the Board of Directors Meeting in a unified manner. Additionally, executive officers and the secretariat of the Board of Directors Meeting provide information as necessary. Such procedures facilitate constructive discussion at the Board of Directors Meeting and ensure the effectiveness of the operations of Board of Directors Meeting. In addition, outside directors and the Group CEO hold meeting to facilitate open exchange of opinions among outside directors and between the top executive officers.

b.Number, structure and tenure of Directors
The number of directors shall not exceed 15 (fifteen) as stipulated in the Articles of Incorporation, considering the need for appropriate decision making and the scope of responsibilities and duties of the Board of Directors.
Outside directors shall be selected in accordance with the Policies for the appointment of directors and executive officers, to include individuals having with a wide range of knowledge and experience having backgrounds in corporate management, academia, and professions related to legal, finance, accounting etc., in order to incorporate wider perspectives from outside with respect to issues such as corporate governance, consumer needs and overseas business operation.
The tenure of director ends upon the closing of General Shareholders Meeting held within the latest fiscal year that is within one year from the appointment in order to clarify responsibility of the management concerning the fiscal year.

(2) Nomination Committee

a.Role of the Committee
The Nomination Committee defines policy and standard for the appointment of directors and executive officers, determines the list of candidates, and involve in the appointment of directors and executive officers of subsidiaries when necessary according to the profile and size of the business.
In addition, the Nomination Committee deliberates appointment and dismissal of Group CEO based on the personal performance evaluation for the purpose of reinforced transparency and corporate governance.

b.Structure of the Committee
The Nomination Committee consists of at least 3 (three) members and the majority of the members are selected from outside directors for the security of autonomy and neutrality of the Committee. The Chairman of the Committee is selected from a member who is an Outside Director.

(3) Audit Committee

a.Role of the Committee
The Audit Committee shall audit the legality and the appropriateness of the duty performance of directors and executive officers produce audit reports and determine agenda to be presented to the General Shareholders Meeting regarding the appointment, dismissal and non-reappointment of Independent Accounting Auditors.
In addition, the Audit Committee exercises its right to consent to the determination of compensation for Independent Accounting Auditors.
The Audit Committee establishes the audit standards, basic audit policy, and audit plans to ensure efficiency in the aforementioned audit practice and also to ensure that audit is conducted effectively in an organized manner.

b.Structure of the Committee
The Audit Committee consists of at least 3 (three) members selected from among the directors who do not assume any executive role, and the majority of the members shall be outside directors.
In addition, the Committee Chairman is appointed from the members of the Committee who are outside directors in principle and deploy more than one resident audit member who is familiar with the business of the Group and audit member who possesses expertise in finance and accounting in principle.

c. Security of the effectiveness of the Committee
An organization designated for the Committee is established to support the duties of the Audit Committee.
In addition, the Audit Committee and the Internal Audit Department communicate and work close collaborately together, to share information appropriately, and the Audit Committee provides consent to internal audit plan and personnel affairs related to general manager of Internal Audit Department.

(4) Compensation Committee

a.Role of the Committee
Compensation Committee determines the evaluation, compensation scheme and compensations of directors and executive officers, and involve in the compensations of directors and executive officers of subsidiaries according to the profile and the size of the business.
In addition, the Compensation Committee performs personal evaluation of Group CEO to enhance transparency and objectivity in the process of compensation decision and reinforce the corporate governance.

b.Structure of the Committee
The Committee consists of at least 3 (three) members selected from directors and the majority of the members are selected from outside directors in order to secure autonomy and neutrality of the Committee. The Chairman of the Committee is selected from a member who is an outside director.

4. Business Executive Structure and Executive Officers

In the Group, executive officers shall make executive decisions and perform executive duties on the matters delegated to executive officers individually from the Board of Directors under the supervision of the Group CEO and the Group COO. Additionally, the Group introduced Business Owner System and Group CxO System in order to perform agile and flexible decision-making and business execution, in the Group's best interest with the objective of increasing corporate value of the Group.

(1) Executive Officers

Executive officers shall make executive decisions and perform executive duties on the matters delegated from the Board of Directors within the scope in accordance with the laws, Articles of Incorporation, internal rules etc., based on management strategy of the Group.

(2)Group CEO

The Group CEO oversees the overall operation of the Group as a Chief Executive Officer of the Group by strategically assigning business owners that are the heads of each business segment and Group CxOs that are the heads of each function of the Group to realize agile and flexible business operation under discontinuous changes in business environment.

(3) Group COO

The Group COO supports the Group CEO in supervision of the general management of the Group, makes decisions and supervises businesses in accordance with the role sharing with the Group CEO.

(4) Business owner

The Group adopts a Group management system where the heads of each business (domestic P&C insurance, overseas insurance, domestic life insurance and nursing care & healthcare) are delegated authority as business owners for business strategy proposals, investment decisions, and personnel deployment to enable agile and flexible decision-making and business execution in each business segment that is close to customers.

(5) Group CxO

Each Group CxO oversees group-wide operation of each function (Group CFO (finance), Group CSO (strategy), Group CDO (digital), Group CRO (risk management), Group CIO (IT), Group CHRO (human resource) and Group CBO (brand)) as head of each function in the Group, to enable agile and flexible decision-making and group-wide business execution in the Group's best interest.

(6) Global ExCo

Global ExCo is held six times a year in principle, as an advisory body to the Group CEO and is the highest executive committee, to discuss themes that significantly impact group-wide management strategy and business executive policy.
Global ExCo is chaired by the Group CEO and comprised of Group COO, Business Owners, Chairman of Overseas M&A, Group CFO, Group CSO and Group CHRO.

(7) Managerial Administrative Committee (MAC)

Managerial Administrative Committee (MAC) is held monthly in principle, as an advisory body to the Group COO to discuss execution of business strategy and important matters related to managerial administrative matters of the Company and Group Companies. Managerial Administrative Committee (MAC) is chaired by the Group COO and comprised of Group CxO’s, Business Owners and others.

5. Policies for Appointment of Directors and Executive Officers

The appointment of directors and executive officers is conducted in accordance with the following policies for appointment of officers. The candidates for directors selected by the Nomination Committee are approved at the General Shareholders Meeting, and the candidates for executive officers are selected by the Nomination Committee and approved by the Board of Directors.

(1) Policies for appointment of Directors

The Company supervises and guides its subsidiaries, formulates management strategies for subsidiaries, engaged mainly in the P&C insurance business as well as comprehensive management strategies for the entire Group. The Company is responsible for the execution and realization of these strategies.
From this perspective, the Board of Directors appoints outside directors who have broad range of knowledge and experiences as corporate management, academia, legal or finance profession to facilitate objective decision making with respect to management issues from a diverse and independent viewpoint and perspective and diversity in terms of gender and nationalities; and the majority of the Board of Directors consists of outside directors.
Additionally, the appointment of directors is conducted based on the selection criteria that incorporate the Comprehensive Guidelines for Supervision of Insurance Companies. The Group formulated outside director independence criteria as a standard for the appointment of outside directors.
For the purpose of carrying out substantive discussions, the number of directors shall be limited to 15 (fifteen) in accordance with the Articles of Incorporation.

(2) Policies for appointment of Executive Officers

The Group formulated a “desired image for executive officers” and “policies for appointment of executive officers” to define required basic skills and qualifications as well as the balance between experience and achievements, as criteria and policy for the appointment of executive officers.

8. Policies for Training of Officers

To facilitate a detailed understanding of the business environment surrounding the Company, training is conducted for newly appointed outside directors and outside Audit & Supervisory Board members covering a variety of topics, including the current state of the Company and the P&C insurance industry, risk management, overseas businesses, and the life insurance business.Outside directors also continuously and practically enrich their understanding of our businesses through the various opportunities of communication with business departments. In addition, corporate officer study groups are held regularly for executive directors so they can acquire knowledge outside their areas of responsibility. Executive directors and Audit & Supervisory Board members also attend seminars and meetings held by various associations and organizations and participate in executive training.
In addition to executive officers, the aforementioned training cultivates management-oriented thinking and leadership through education programs in conjunction with outside specialized companies with the intent of cultivating the next generation of managers.

9. Policies on Decisions pertaining to Compensation for Officers

The Group regards compensation for officers as important matters from the viewpoints of improvement in business performance and corporate value, and sets policies on compensation for officers as follows:

(1) Basic policy on Compensation for Officers (Common to Group Companies)

a.The form and level of compensation for officers shall enable recruiting and retaining superior human resources as management of the Group.

b.Compensation structure shall be consistent with business strategy and promote officers' incentive to improve performance for the sake of the Group's growth.

c.Compensation shall reflect medium to long-term results and initiatives by officers as well as single-year results.

d.Objectiveness, transparency and fairness that can fulfill accountability to stakeholders shall be achieved in compensation structure for the Company and major subsidiaries through deliberation process in the Nomination and Compensation Committee inside the Group.

(2) Compensation structure for Officers

The Group sets policies on compensation for officers as follows. However, in cases there are reasonable grounds to believe that those policies should not be applied, the amount and composition of compensation are determined by the Board of Directors based on the recommendation of the Nomination and Compensation Committee.
The Nomination and Compensation Committee examines compensation budget for all directors and executive officers and makes recommendations to the Board of Directors on an annual basis. The amount of compensation for directors and executive officers are determined by the Board of Directors within the budget.

a.Composition of compensation for directors and how it is determined

Compensation for directors shall consist of monthly compensation, performance-linked compensation and performance-linked stock compensation.
With regard to monthly compensation, performance-linked compensation and performance-linked stock compensation, fixed amount shall be determined for monthly compensation, while a base amount and the number of standard point (one point = one common share) shall be determined for performance-linked compensation and performance-based stock compensation depending on whether the person in an outside or internal director, or does or does not have authority to represent the Company.
Nevertheless, performance-linked compensation and performance-linked stock compensation will not be paid to outside directors.
Compensation as a director and compensation as an executive officer shall be totaled and paid together to those directors who are serving concurrently as executive officers.
Overview of performance-linked compensation and performance-linked stock compensation are described in d. and e. below.

b.Composition of compensation for executive officers and how it is determined

Compensation for executive officers shall consist of monthly compensation, performance-linked compensation and performance-linked stock compensation. The amount and composition of compensation for the group CEO are examined and recommended by the Nomination and Compensation Committee, and determined by the Board of Directors based on the business environment and market level of compensation for executive officers, and group CEO's achievements and skills. The amount and composition of compensation for executive officers other than group CEO are determined based on the business environment and market level of compensation for executive officers and shall reflect the significance of duties, strategic positioning, achievements and skills. Fixed amount shall be determined for monthly compensation, while a base amount and the number of standard point (one point = one common share) shall be determined for performance-linked compensation and performance-linked stock compensation
Overview of performance-linked compensation and performance-linked stock compensation are described in d. and e. below.

c.Composition of compensation for Audit & Supervisory Board members and how it is determined

The form and level of compensation for Audit & Supervisory Board members shall commensurate with their duties and responsibilities and determined at a fixed amount through discussion between the Audit & Supervisory Board members depending on whether the Audit & Supervisory Board member is full-time or part-time while giving due consideration to their independence.

d. Performance-linked compensation

The Company has introduced performance-linked compensation system in order to align compensation for officers and business strategy and promote officer's incentive to improve performance for further growth of the Group. Below is overview of the system:

  • Performance-linked compensation shall be determined by reflecting single-year corporate performance and individual performance to the base amount of performance-linked compensation.
  • Performance metrics to evaluate corporate performance are adjusted consolidated profit and adjusted consolidated ROE, and coefficient is determined as a ratio of actual figures to targeted figures (projected figures in business plan). For performance metrics to evaluate individual performance, coefficient is determined depending on evaluation result in individual performance evaluation of officers.
  • Coefficient for performance-linked compensation is calculated by multiplying the above-mentioned coefficient for company performance by coefficient for individual performance, and the amount of payment is calculated by multiplying base amount of performance-linked compensation by the coefficient for performance-linked compensation.
  • For officers who serve as business owners or in charge of those businesses, sales and profit of the business are used as performance metrics to evaluate corporate performance.

e.Performance-linked stock compensation

The company had introduced performance-linked stock compensation system in order to increase the linking between compensation and increases in corporate value over the medium to long-term. Below is overview of the system:

  • Performance-linked stock compensation shall be determined by reflecting the medium to long-term stock value and consolidated performance to the number of performance-linked stock compensation standard point in comparison to the market.
  • Coefficient for stock value shall be determined by comparing 3-year growth rate of our stock value to the TOPIX growth rate.
  • Coefficient for consolidated performance shall be determined by comparing our growth rate of consolidated net income over the past 3 business years to the growth rate of peer group (global companies centering around insurance companies).
  • Coefficient for performance-linked stock compensation is calculated by adding on the above-mentioned coefficient for stock value with coefficient for consolidated performance, and the point to provide is calculated by multiplying the number of performance-linked stock compensation standard point by the coefficient for performance-linked stock compensation.

10. Information Disclosure

The Company fulfills its responsibility to explain financial and non-financial information, including management strategies, risks, and governance, through timely, appropriate, equitable, and accurate disclosure. Disclosure systems, including internal rules, shall be established to ensure that essential information is supplied appropriately and promptly.

11. Supervision Policies for Group Companies

To improve the entire Group’s corporate value, the Company shall take steps to supervise the entire Group under the business owner system and group CxO system. To achieve the above, SOMPO HOLDINGS shall establish structures, including internal rules, to ensure its ability to conduct appropriately the business management of companies within the Group.
The Company shall formulate a common management vision and basic policies for the Group and notify these among Group companies. It shall supervise Group companies’ management through monitoring and other means. The Company shall also establish appropriate systems, including risk management systems, regulatory compliance systems, conflict of interest control systems, customer information management systems, and internal audit systems, in order to ensure effectiveness of the internal control systems of Group companies.
Group companies shall adhere to basic policies for the Group and formulate their own basic policies and business plans on the basis of the Group’s basic policies and plans.