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

of February 16, 2004 No. 35

About approval of Requirements to procedure for carrying out internal audit of the insurance (reinsurance) organization, branch of the insurance (reinsurance) organization – the nonresident of the Republic of Kazakhstan

(as amended on 12-02-2021)

For the purpose of implementation of the Law of the Republic of Kazakhstan "About insurance activity" Board of the Agency of the Republic of Kazakhstan on regulation and supervision of the financial market and the financial DECIDES: organizations

1. Approve the enclosed Requirements to procedure for carrying out internal audit of the insurance (reinsurance) organization, branch of the insurance (reinsurance) organization – the nonresident of the Republic of Kazakhstan.

2. This resolution becomes effective after fourteen days from the date of state registration in the Ministry of Justice of the Republic of Kazakhstan.

3. To department of strategy and analysis (Edenbayev E. S.):

1) together with Legal department (Baysynov M. B.) to take measures to state registration in the Ministry of Justice of the Republic of Kazakhstan of this resolution;

2) in ten-day time from the date of state registration in the Ministry of Justice of the Republic of Kazakhstan to bring this resolution to the attention of the interested divisions of the Agency of the Republic of Kazakhstan on regulation and supervision of the financial market and the financial organizations and insurance (reinsurance) organizations.

4. To department on ensuring activities of the Agency of the Republic of Kazakhstan on regulation and supervision of the financial market and the financial organizations to take measures to the publication of this resolution in mass media of the Republic of Kazakhstan.

5. To impose control of execution of this resolution on the vice-chairman of the Agency of the Republic of Kazakhstan on regulation and supervision of the financial market and the financial organizations Dosmukametov K. M.

Chairman

B. Zhamishev

Approved by the Resolution of Board of the Agency of the Republic of Kazakhstan on regulation and supervision of the financial market and the financial organizations of February 16, 2004 No. 35

Requirements to procedure for carrying out internal audit of the insurance (reinsurance) organization, branch of the insurance (reinsurance) organization – the nonresident of the Republic of Kazakhstan

These Requirements to procedure for carrying out internal audit of the insurance (reinsurance) organization, branch of the insurance (reinsurance) organization – the nonresident of the Republic of Kazakhstan (further – Requirements) are developed according to the Laws of the Republic of Kazakhstan of December 18, 2000 "About insurance activity", of February 28, 2007 "About financial accounting and the financial reporting", of May 13, 2003 "About joint-stock companies" and other regulatory legal acts of the Republic of Kazakhstan and establish requirements to procedure for carrying out internal audit of the insurance (reinsurance) organization, branch of the insurance (reinsurance) organization – the nonresident of the Republic of Kazakhstan.

Chapter 1. General provisions

1. Internal audit of the insurance (reinsurance) organization, including its branches and representations, and also activities of insurance agents and branch of the insurance (reinsurance) organization – the nonresident of the Republic of Kazakhstan (further - insurance companies), is performed according to requirements of the legislation of the Republic of Kazakhstan about insurance and insurance activity, constituent and internal documents of insurance company, taking into account the features determined by these Requirements.

2. Main objective of system of internal audit in insurance company is control over the implementation by employees of insurance company of the legislation of the Republic of Kazakhstan, obligatory availability and observance of internal procedures and rules of insurance company and ensuring proper level of reliability corresponding to nature and scales of the operations performed by insurance company and risk minimization of its activities.

3. Internal audit in insurance company is booked for ensuring control for:

1) implementation of activities by insurance company according to requirements of the legislation of the Republic of Kazakhstan, and also policy of financial accounting and the established internal procedures fixed by the relevant internal documents of insurance company;

2) implementation of systems analysis and assessment of activities of insurance company regarding its financial stability and solvency;

3) check and efficiency evaluation of control measures behind execution of the made decisions;

4) efficiency evaluation of asset management system and obligations, including assessment of structure of portfolio and potential risks;

5) timeliness, correctness, completeness and accuracy of reflection of insurance activity and other activities, stipulated by the legislation about insurance and insurance activity;

6) risk management, arising during implementation of insurance and other activity and implementation of monitoring of their minimization;

7) activities of insurance agents and the risks connected with it in case of the conclusion them insurance contracts;

8) observance established by authorized body on regulation, control and supervision of the financial market and the financial organizations (further - authorized body) prudential standard rates and other regulations and limits, obligatory to observance;

9) compliance of the reporting of insurance company to standards of the international financial reporting.

4. Risks of insurance company are understood as danger (opportunity) of emergence of losses (losses) following from implementation of insurance and other activity, the stipulated by the legislation Republic of Kazakhstan about insurance activity.

In case of management and monitoring of risks of insurance company differentiate the following main types of risks:

1) credit risk - risk of emergence of expenses (losses) arising owing to inability of execution or violation by the partner of initial terms of the contract (contract) or other obligation concerning insurance company including restrictions or obstacles in payment transfer from nonresidents of the Republic of Kazakhstan;

2) legal risk - risk of emergence of expenses (losses) arising owing to violation of requirements of the legislation of the Republic of Kazakhstan by insurance company or discrepancy of practice of the insurance (reinsurance) organization to its internal documents, and in the relations with nonresidents of the Republic of Kazakhstan - to the legislation of other states;

3) operational risk - risk of emergence of expenses (losses) arising owing to violation (non-compliance) by the insurance (reinsurance) organization of requirements to the organization of internal control.

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