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Corporate Governance

Helios Underwriting Plc is incorporated in the UK and the Company’s shares are traded on the AIM Market of the London Stock Exchange. As a result, the Company is subject to the UK’s City Code on Takeovers and Mergers.

The Board is committed to achieving a high standard of corporate governance within the Company and its subsidiaries, which it seeks to demonstrate by adopting and being compliant with the principles of the Quoted Companies Alliance’s Corporate Governance Code (‘the QCA Code’). The Board considers the QCA Code is relevant and appropriate for the Company as the ten principles of the QCA Code focus on “pursuit of medium to long-term value for shareholders without stifling the entrepreneurial spirit in which the company was created”.

Accordingly, the Board ensures the Company has a strong governance framework embedded within its culture and applies the principles of the QCA Code. The Board periodically reviews the governance framework and, as the Company evolves, will make such improvements and changes as considered necessary. Details are set out below of how the Company addresses and complies with the principles of the QCA Code and further information will be included in our next Annual Report and Accounts.

This website contains the information required to be disclosed by AIM Rule 26.

Michael Cunningham, Non-executive Chairman

Last updated: 27 September 2018

QCA Code Principle 1

Establish a strategy and business model which promotes long-term value for shareholders.

The Company’s business model and strategy, as detailed on the Company Overview page of this website, is to build a portfolio of underwriting capacity at Lloyd’s through the purchase of corporate members.

As at 1 July 2018 (after publication of the Company’s Report and Accounts) the Company had a portfolio of capacity of £41m in quality syndicates, 79% of which are managed by leading managing agents at Lloyd’s. This strategy of focussing on quality syndicates helps to protect against unnecessary risk, as does the use of quota share reinsurance to reduce underwriting risk and provide underwriting capital for the portfolio. In accordance with our strategy, when acquisitions are made any participations on weaker syndicates in acquired portfolios are sold to maintain the overall quality.

This strategy, which the Company will continue to follow, has proved successful to date in delivering shareholders value in the medium to long term and the underwriting performance of the Helios portfolios has consistently outperformed the Lloyd’s market average.

QCA Code Principle 2

Seek to understand and meet shareholder needs and expectations.

The Board is committed to communicating effectively with the Company’s shareholders and other stakeholders, and to understanding their needs and expectations. To achieve this, the Board encourages two-way communication with investors and stakeholders and responds appropriately to ensure all questions or issues received from them are addressed in a timely manner.

Nigel Hanbury, the Chief Executive, is the principal point of contact and his details are disclosed on the Contacts page of this website. His contact details are also disclosed on all announcements made by the Company, together with those of Arthur Manners the Finance Director, which can be found on the Announcements page of this website. In addition, contact details for our Company Secretary, Martha Bruce, are given in all communications to shareholders about General Meetings and on the Advisers page of this website.

The Chief Executive, Finance Director and Chairman also have regular, direct contact with large shareholders and make sure that their opinions are communicated to the Board as needed. Shareholders have been advised that the Board intends to maintain a sustainable and appropriate level of dividend cover in accordance with Company’s dividend policy. However, in the 31 December 2017 Report and Accounts and at the AGM shareholders were openly advised that this policy was evolving to reflect the results of the Company and the need to retain cash to take advantage of opportunities to make acquisitions at favourable prices and for share buybacks. This explanation of a variance to shareholders’ expectations was well received.

Final results of proxy appointments and of voting at General Meetings are disclosed on the Documents & Papers and Announcements pages of this website. Furthermore, if voting decisions stray from Company expectations, the Board will engage with those shareholders concerned to understand and try to address their concerns.

QCA Code Principle 3

Take into account wider stakeholder and social responsibilities and their implications for long-term success.

The Board is committed to ensuring the Company’s business remains sustainable, not only from the shareholders’ perspective, but also for the environment, customers, suppliers and others affected by the Company’s activities. The Company has in place a payment policy which is observed and annually reviewed.

However, whilst through its subsidiaries the Company owns a portfolio of underwriting capacity interests at Lloyd’s, it has no direct responsibility for the management of those businesses. Each managing agent has responsibility for the management of those businesses, their staff and employment policies and the environmental impact. Therefore, the Board does not consider it appropriate to monitor or report any performance indicators in relation to corporate, social or environmental matters.

However, the Company remains focused on participations in quality syndicates whose key characteristics are conservative reserving and a focus on profit rather than growth. The Board considers these are important factors in ensuring long-term success and sustainability.

In addition, for a managing agent to operate at Lloyd’s there are ‘statements of business conduct’ (‘Lloyd’s Minimum Standards’) with which the managing agent must comply. Lloyd’s Minimum Standards encompass matters such as claims management, exposure management, governance, investment management, reserving and conduct (including the requirement to treat customers fairly). The managing agents and senior managers within them are also subject to regulation by the Financial Conduct Authority (‘FCA’) and the Prudential Regulatory Authority (‘PRA’) and must comply with their stringent and regular reporting requirements.

The Chief Executive and Finance Director are in regular contact with the managing agents to review performance of the portfolio and discuss the market, competition, emerging issues and opportunities. Periodically, managing agents are invited to attend Board meetings to provide market updates. Information provided by the managing agents is considered when making decisions about improvements to the Company’s products or business, or about developing new products or exploring new opportunities.

QCA Code Principle 4

Embed effective risk management, considering both opportunities and threats, throughout the organisation.

Given the nature of the Company’s activities the Board is aware of and alert to the importance of effective risk management, considers risks to the business at Board meetings and formally reviews the principal risks to the business at least annually. The managing agents are also periodically invited to Board meetings to provide an update on the insurance market, outlook, risks and challenges.

However, the majority of risks to the Company’s future cash flows arise from the subsidiaries’ participations in the results of Lloyd’s syndicates, as detailed on pages 9 and 35 to 38 (inclusive) of the Company’s 31 December 2017 Report and Accounts. These risks are mostly managed by the syndicates’ managing agents. The Company’s role in managing these risks, together with its subsidiaries and members’ agents, is focussed on selection of the syndicate participations; monitoring syndicate performance; and purchasing appropriate member level reinsurance.

The Company monitors the performance of the syndicates it supports on a quarterly basis and, in advance of committing support for an upcoming year, will review syndicate business plans with the managing agents. Assurance will be sought that adequate measures are in place to manage risks, absent of which the Company will withdraw support for the next year of account.

The Chief Executive and Finance Director meet regularly to review the Company’s ongoing trading performance, discuss budgets and forecasts and any new or emerging risks associated with ongoing trading. The Board regularly reviews actual performance against budgets and forecasts, as well as anything brought to its attention following the Chief Executive and Finance Director’s meetings. Project milestones and timelines are also reviewed regularly.

Opportunities and threats to the Company’s business model and strategy are also periodically considered at Board strategy meetings, two of which have been held in 2018.

QCA Code Principle 5

Maintain the board as a well- functioning, balanced team led by the chair.

As detailed on the Directors & Management page of this website and on pages 14 and 15 of the 31 December 2017 Report and Accounts, the Board comprises two Executive Directors and four Non-Executive Directors (including the Chairman). All Directors have agreed in the terms of their engagement to commit such time as is necessary to discharge their responsibilities to the Company effectively; to attend all scheduled Board, Committee, Strategy, Non-executive Directors (where applicable) and Shareholder meetings; and to be available at all times to discharge their duties effectively.

The Board considers all Non-executive Directors independent in character and judgement and reviews, on an on-going basis, whether there are any relationships or circumstances which are likely to or could affect the independence they bring to matters considered by the Board.

Each Director’s attendance at Board and Committee meetings is disclosed on page 15 of the Annual Report and Accounts for the year ending 31 December 2017.

QCA Code Principle 6

Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

It is evident from the Directors’ profiles on page 14 of the Annual Report and Accounts for the year ending 31 December 2017 and on the Directors & Management page of this website that there is a good balance of experience and skills that each Director brings to the Board.

As detailed above, the Nomination and Remuneration Committee periodically reviews the size, structure and composition of the Board and, in doing so, considers the balance of skills, knowledge, experience and diversity on the Board. Any recommendations from such review are reported to the Board and, should they identify a need for training and development or indeed a change in composition of the Board, they would be actioned appropriately.

The Company Secretary supports the Chairman in addressing the training and development needs of Directors to ensure they are kept up-to-date with changes to law, regulations and corporate governance best practice. Where necessary expert professional assistance is sought to keep Directors appraised of developments of a detailed technical or regulatory nature.

QCA Code Principle 7

Evaluate board performance based on clear and relevant objectives, seeking continuous improvement.

In addition to the Nomination and Remuneration Committee’s review of succession planning, the performance and effectiveness of the Board, its Committees and of individual Directors is reviewed annually. On an on-going basis Directors are encouraged to raise any issues or concerns with the Chairman as soon as appropriate, as the Chairman will do in the event there are any matters causing the Company concern.

In addition, the performance of all continuing Directors is considered before they are proposed for re-election at each AGM.

It is intended that more formality will be introduced to the internal Board evaluation process in the upcoming months, following which further details will be disclosed on the website.

QCA Code Principle 8

Promote a corporate culture that is based on ethical values and behaviours.

The Board requires that the Company’s strategy of building a portfolio of underwriting capacity at Lloyd’s through the purchase of corporate members is carried out in a manner that is ethical and sustainable. This is achieved by focussing on syndicate portfolios comprising quality syndicates which are managed by leading managing agents at Lloyd’s.

The Directors and the Board determine, support and will observe the Company’s ethical values in order to promote and preserve the Company’s reputation.

The Board has adopted a Share Dealing Code and Disclosure Policy that any Director, employee or person engaged by the Company who is in possession of ‘inside information’ must comply with. All such persons are prohibited from trading in the Company’s securities if they are in possession of ‘inside information’. The Directors will also comply with Rule 21 of the AIM Rules relating to Directors’ dealings.

In addition, in the interests of openness and transparency, a record is kept of Directors’ interest and of persons closely associated with them to ensure they have no conflicts or possible conflicts with the interests of the Company. In addition, the Board reviews whether there are relationships or circumstances which do, or are likely to, affect independence of the Non-executive Directors.

QCA Code Principle 9

Maintain governance structures and processes that are fit for purpose and support good decision- making by the board.

Arrangements made by the Company and structures in place to appropriately address corporate governance are set out above and are detailed in the Corporate Governance Statement on pages 15-16 of our Report and Accounts for the year ended 31 December 2017.

These arrangements and all policies and practices are periodically reviewed by the Board throughout the year to ensure they remain effective and, wherever possible and appropriate, are in accordance with corporate governance best practice.

The Board expects the Company’s governance structures and processes to evolve over time as the Company develop and grows in accordance with strategy. Disclosures on this website will therefore be periodically updated to reflect these changes.

The Board is collectively responsible for formulating, reviewing and approving the Company’s strategy; determining the budget; approving corporate actions; monitoring performance and progress against plans and strategy; and for corporate governance within the Company. In order to do this effectively, regular informal discussions are held between the Executive and Non-executive Directors. The Board meets formally at least four times each calendar year, and at such other times as required.

The Company’s Non-executive Chairman, Michael Cunningham, is responsible for running the Board effectively and ensuring the Company’s approach to corporate governance is appropriate, with assistance from the Company Secretary. The Non-executive Chairman has also been instrumental in formalising regular, dedicated strategy meetings.

The Company Secretary ensures that all Directors receive regular and timely information about the Company’s operational and financial performance and that all necessary information is circulated to the Directors sufficiently in advance of meetings to enable the Board to have meaningful discussions and make informed decisions. In addition, all Directors have access to advice and assistance from the Company Secretary and are permitted to obtain independent professional advice at the Company’s expense where they consider it is necessary for them to effectively discharge their duties.

The Executive Directors are responsible for the day-to-day management of the Company, running the business and informing and consulting with the Board about any significant financial and operational matters.

Nigel Hanbury, the Company’s Chief Executive Officer (‘CEO’), is responsible for the Company’s operations and implementing strategy and for keeping the Board appraised of conditions and developments in the market, including competition, opportunities for acquisitions and expansion, industry developments, new product ideas, and pending changes to rules and regulations that might impact the Company.

Arthur Manners, the Finance Director, works alongside the CEO and has overall control and responsibility for all financial aspects of the Company’s strategy. The Finance Director is responsible for the Company’s out-sourced accounting function and ensures all financial systems are robust, compliant and support current activities and plans for future growth. The Finance Director also co-ordinates corporate finance and has responsibility for funding and capital requirements, debt, taxation, equity and acquisition finance.

Other key areas of responsibility for the Non-executive Directors include constructively challenging and helping to develop proposals on strategy: monitoring and scrutinising reporting of performance against agreed goals and objectives; determining the integrity of financial information and that financial controls and risk management systems are robust and defensible; and determining remuneration of the Executive Directors, appointing and removing Executive Directors and planning succession (through the Nomination and Remuneration Committee as detailed below).

The Board has a formal schedule of matters that require approval by the Board and is supported by the Audit and Nomination and Remuneration Committees as detailed below.

A copy of the Schedule of Matters Reserved to the Board and of the Audit Committee and Nomination and Remuneration Committee Terms of Reference will be uploaded and available on the Documents & Papers page of this website shortly.

Audit Committee

The Audit Committee meets at least twice a year and is responsible for ensuring that the Group’s financial performance is properly monitored, controlled and reported. The Audit Committee oversees the appointment of external auditors, reviews their performance and meets with them to discuss audit planning, review the Company’s financial statements (including the annual and interim results) and audit findings, and to discuss reports from the auditors on the effectiveness and adequacy of the Company’s internal controls, risk management systems and accounting policies. The members of the Audit Committee are all Non-executive Directors, being Michael Cunningham, Edward Fitzalan-Howard and Andrew Christie, who is also chairman of the committee.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee meets at least twice a year and is responsible for determining and recommending to the Board the terms and conditions of employment and remuneration of Executive Directors including setting targets and approving payments in respect of performance related incentives, bonuses and share scheme awards. No Director is involved in determining his own remuneration and the Non-executive Chairman is excluded from discussions when the Board determines the Non-executive Directors’ remuneration (including his own).

The Nomination and Remuneration Committee has responsibility for periodically reviewing the structure, size and composition of the Board with a view to the Company’s strategy and likely future requirements; considering succession planning; and identifying candidates and recommending new appointments to the Board.

The members of the Nomination and Remuneration Committee are all Non-executive Directors, being Michael Cunningham, Edward Fitzalan-Howard and Andrew Christie, who is also the committee chairman.

QCA Code Principle 10

Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.

As detailed under QCA Code Principle 2 above, the Board is committed to communicating effectively with the Company’s shareholders and other stakeholders to keep them appraised of the Company’s progress. Shareholders and stakeholders are advised about trading performance and any significant developments through timely announcements made to the market electronically via the London Stock Exchange’s Regulatory New Service (‘RNS’). These announcements are also automatically uploaded on the Announcements page of this website and copies of press releases, broker notes and analysts’ presentations are placed on the Press and Presentations pages of the website.

In addition, the Board recognises the opportunity the AGM provides for them to meet the Company’s shareholders. At the AGM shareholders can pose questions and raise issues either formally during the meeting or informally immediately following the AGM. The Company welcomes and encourages communication with its shareholders, whether institutions or private investors, and the AGM provides an ideal opportunity for this.

All outcomes of votes and historical annual reports and other governance-related material are included on the Announcements, Corporate Governance and Reports & Accounts pages of this website.