THE RESOLUTION OF BOARD OF THE AGENCY OF THE REPUBLIC OF KAZAKHSTAN ON REGULATION AND DEVELOPMENT OF THE FINANCIAL MARKET

of January 23, 2023 No. 1

About introduction of amendments to the resolution of Board of National Bank of the Republic of Kazakhstan of August 27, 2018 No. 198 "About approval of Rules of forming of risk management system and internal control for the insurance (reinsurance) organizations, branches of the insurance (reinsurance) nonresident organizations of the Republic of Kazakhstan"

Board of the Agency of the Republic of Kazakhstan on regulation and development of the DECIDES: financial market

1. Bring in the resolution of Board of National Bank of the Republic of Kazakhstan of August 27, 2018 No. 198 "About approval of Rules of forming of risk management system and internal control for the insurance (reinsurance) organizations, branches of the insurance (reinsurance) nonresident organizations of the Republic of Kazakhstan" (it is registered in the Register of state registration of regulatory legal acts at No. 17462) the following changes:

state preamble in the following edition:

"According to the laws of the Republic of Kazakhstan "About insurance activity", "About the state statistics" the Board of National Bank of the Republic of Kazakhstan DECIDES:";

in Rules of forming of risk management system and internal control for the insurance (reinsurance) organizations, branches of the insurance (reinsurance) nonresident organizations of the Republic of Kazakhstan approved by the specified resolution:

state Item 2 in the following edition:

"2. In Rules the following concepts are used:

1) underwriting - complex of procedures for acceptance on insurance or reinsurance of the declared object of insurance on the basis of assessment of insurance risks for the purpose of determination of insurance coverage, conditions of insurance, level of the franchize and insurance rate in the limits set by the actuary;

2) the management reporting - the instrument of internal control and assessment of organization activity;

3) gap analysis - methods of measurement of interest risk and liquidity risk on the basis of comparison of amount of the assets and liabilities of the organization subject to changes of rates of remuneration or due for settlement during certain terms;

4) limitation - establishment of high-quality, quantitative restrictions of the accepted risks, establishment of restrictions for transactions (transactions) of the organization.

In case of limitation the following parameters are determined:

indicator on which the limit is set;

method of measure calculation on which the limit is set;

limiting (maximum, minimum) measure value;

5) conflict of interest - situation in case of which there is contradiction between personal interest of officials of the organization and (or) his workers and proper execution of the ex-officio full powers by them or valuable and other interests of the organization and (or) his workers and (or) clients which can entail adverse effects for the organization and (or) his clients;

6) policy - set of the internal documents including the policy and (or) other internal documents determining the necessary criteria, parameters, approaches, the principles, standards, procedures and mechanisms providing effective functioning of the organization and compliance of its activities of strategy and to admissible risk level;

7) stress testing - methods of measurement of potential influence on financial position of the organization of exclusive, but possible events which can exert impact on organization activity;

8) risk - possibility of emergence of the circumstances causing uncertainty or impossibility of receipt of the expected results of organization activity, emergence of expenses (losses);

9) system of risks assessment - set of the coefficients intended for complex financial analysis of the organization;

10) risk management system - the permanent structured process established by the board of directors and board of the organization performed within all organization for the purpose of identification, assessment, monitoring, decrease in the risks and their effects influencing goal achievement of the organization;

11) the card of risk - the graphical and text description of the risks of the organization located in the table according to which on one "axis" force of impact or the importance of risk, and on another probability or frequency of its origin is specified;

12) risk limit - means of quantitative or high-quality restriction of the accepted risk;

13) identification of risk – process of stay, creation of the list and description of risk elements;

14) risk measurement - determination of degree of risk probability and the sizes of potential expenses (losses) which are performed by means of assessment of effects and probability of approach of event in the mathematical way by means of application of probability theory and the law of large numbers on the basis of statistical data;

15) authorized body - authorized body on regulation, control and supervision of the financial market and the financial organizations;

16) internal audit - indivisible element of managerial supervision by means of which the service of internal audit estimates the financial reporting, and also other data and information which are giving in to quantitative and quality standard of organization activity for the purpose of further reflection of degree of its compliance to the legislation of the Republic of Kazakhstan on insurance and insurance activity on compulsory insurance, about joint-stock companies, about the security market, about counteraction of legalization (washing) of income gained in the criminal way and to terrorism financing, internal documents, the international professional standards of internal audit;

17) internal control is the process performed by the board of directors, collegiate organs, board, employees of the organization, aimed at providing goal achievement on the following categories:

efficiency of activities;

reliability, completeness and timeliness of the financial reporting and other management reporting;

compliance with law of the Republic of Kazakhstan about insurance and insurance activity, about compulsory insurance, about joint-stock companies, about the security market, about counteraction of legalization (washing) of income gained in the criminal way and to terrorism financing;

18) internal control system - the set of control procedures, actions and techniques providing:

proper and effective conducting financial and economic organization activity;

observance of requirements of the legislation of the Republic of Kazakhstan on insurance and insurance activity, about compulsory insurance, about joint-stock companies, about the security market, about counteraction of legalization (washing) of income gained in the criminal way and to terrorism financing;

effective separation of responsibility;

timely and proper execution by employees of the organization of requirements of internal documents;

ensuring safety of property;

prevention and identification of the facts of fraud and managerial mistakes;

timeliness of preparation, reliability and completeness of the financial reporting and other management reporting.

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