Board corporate governance statement Purpose

Corporate governance is the framework of business principles, structures and controls within which the Group, its management, directors and shareholders operate. Its aim is to ensure:

• accountability;
• transparency of responsibility;
• the containment of risk within the Group’s agreed risk appetite;
• the appropriate management of conflicts of interest; and
• effective relationships between the Company’s stakeholders, especially between the Board and shareholders

all of which support the Company’s underlying purpose of creating shareholder value through the successful delivery of its vision and strategy.

This report sets out the practical elements of the Company’s corporate governance policies and practices.

Commitment and basis of reporting

The Company is committed to high standards of corporate governance, including to the principles contained in the 2003 edition of the Combined Code on Corporate Governance issued by the Financial Reporting Council (Combined Code).

During the year ended 31 December 2006 the Company was in compliance with all of the provisions of section 1 (companies) of the Combined Code. This report, together with the Directors’ remuneration report and the reports from the Nomination and Audit Committees, describes how the Company applied the Main and Supporting Principles of the Combined Code during the year.

Role and responsibilities of the Board, its committees and the Company Secretary

The schedule of matters reserved to the Board for its own and its committees’ decisions provides that the Board’s primary obligation is to lead and control the Company and its business, with exclusive decision making powers over such matters as: overall strategy and resources; remuneration policies; accounting policies; and capital expenditure, acquisitions and debt facilities over certain thresholds. Matters reserved to the Board also include certain key Group policies, appointments and categories of public announcements. The detailed implementation of all these matters, and day-to-day business, are left to management, which reports formally to the Board at least quarterly on underwriting, financial and other operational matters and objectives. The current schedule of matters reserved to the Board is available in the ‘Corporate Governance’ section of ‘Investor Relations’ on the Company’s website or from the Company Secretary.

The Board is supplied in a timely manner with the appropriate information to enable it to discharge its duties, including providing constructive challenge to, and scrutiny of, management. Further information is obtained by the Board from the executive directors and other relevant senior executives as the Board considers appropriate. Procedures are in place for directors to take independent professional advice, when necessary, at the Company’s expense.

There is a division of responsibilities on the Board between the Chairman, who is responsible for leading and running the Board and related matters such as Board induction and evaluation, and the Group Chief Executive, who has executive responsibility for running the Group’s business. A statement detailing this division of responsibilities, which includes provision for the Chairman’s role in shareholder relations and in ensuring constructive relations between executive and non-executive directors, was approved by the Board in 2003. Mr Nigel Buchanan is the senior independent director designated as an appropriate director to whom shareholders’ concerns may be conveyed if contact through the normal channels of Chairman, Chief Executive or Finance Director has failed to resolve them or is inappropriate.

Key parts of the duties of the Board, notably with regard to Board appointments, controls, risk management and remuneration-related matters, are carried out through, or on the recommendation of, the Board’s Nomination, Audit and Remuneration Committees. The majority of the members of the Nomination Committee and all the members of the latter two committees are independent non-executive directors. The terms of reference of each of these committees, as well as a statement of the relationship between the Company and its remuneration advisers, are available in the ‘Corporate Governance’ section of ‘Investor Relations’ on the Company’s website or from the Company Secretary.

The Board and its committees are supported by the Company Secretary who, under the direction of the Chairman, helps to ensure good communication and information flows within the Board, including between executive and non-executive directors and between the Board and its committees. He is also, with the Chairman, a guardian of all Board procedural matters, regularly advises the Board on governance matters and facilitates the Board updating and induction work outlined below.

The non-executive directors met during the year without executive directors or other executive management present, including once without the Chairman. The Chairman chairs full non-executive meetings and the senior independent director chairs meetings when the Chairman is not present.

Board meetings

The Board meets on a regular basis, holding five main pre-scheduled Board meetings in 2006 (2005: six) and, as in 2005, a planning and strategy session over two days (2005: one). No Board meetings were held during the year to consider corporate transactions (2005: two). The attendance record of each director (out of six possible meetings, including the planning and strategy session, unless stated otherwise) was as follows:

Board meeting attendance 2006

	Number of Director meetings attended
N J C Buchanan	6
B D Carpenter	6
R H Davey	6
R A Hextall	6
A W Holt	6
R S Joslin	5
K T Kemp	5
R W Mylvaganam	6
C E L Philipps	6
Lord Stewartby (retired 25 May 2006 – maximum possible meetings 3)	3
R J Taylor	6
Sir Mark Wrightson Bt (appointed 15 March 2006 – maximum possible meetings 4)	4
Average % attendance	97%

Board terms of appointment, membership and time commitments

The Articles of Association of the Company provide that, following a director’s election by shareholders at the Annual General Meeting immediately following his or her initial appointment by the Board, each director’s term of office, before being required to submit himself or herself to shareholders for re-election, is three years. Details of the procedures whereby appointments and re-appointments to the Board are considered on a formal, rigorous and transparent manner, on merit and against objective criteria, are set out in the Report from the Nomination Committee.

At both the start and end of the year the Board comprised: the Chairman, six other non-executive directors (of whom five were classified as independent and one not) and four executive directors. Biographical details of all the current directors are included on pages 46 and 47. The changes to the Board during the year were the appointment on 15 March 2006 of an independent non-executive director, Sir Mark Wrightson Bt, and the retirement from the Board on 25 May 2006 of the Deputy Chairman and senior independent non-executive director, Lord Stewartby. On 25 May 2006 Mr Buchanan was appointed senior independent non-executive director.

The Board continues to satisfy itself that the Chairman has sufficient time available to devote to his duties as non-executive Chairman of Amlin plc and, since 1 April 2006, as non-executive Chairman of the Company’s principal UK operating subsidiary, Amlin Underwriting Limited (AUL). He and the other current non-executive directors have made the following minimum annual time commitments to the Company, to include (where applicable) time spent on duties as a non-executive director of AUL:

	Number of Director meetings attended
Chairman (Mr Taylor):	75 days
Chairman of either the Audit or Remuneration Committee
and a member of all three main Board committees
(Messrs Buchanan and Mylvaganam):	30 days
Other non-executive directors (Messrs Davey, Joslin, Kemp
and Sir Mark Wrightson):	20 days

Further details of the terms of appointment of both the non-executive and executive directors are set out in the Directors’ remuneration report.

Board independence

The non-executive Chairman was independent on his appointment in 1998.

Apart from Mr Kemp, all the non-executive directors serving during and/or since the year were determined by the Board as being independent in character and judgement with (in the words of the Combined Code) “no relationships or circumstances which are likely to affect, or could appear to affect, the director’s judgement”.

Until 31 December 2002 Mr Joslin was Vice Chairman of State Farm Mutual Automobile Insurance Company (State Farm), which is a 7.3% shareholder in the Company and until November 2004 provided material Letter of Credit facilities to the Group (on commercial terms). His relationship with State Farm ceased on his retirement three years before the start of 2006. He was therefore classified as independent throughout the year.

Lord Stewartby, who retired from the Board in May 2006, had been a director since October 1995. Notwithstanding provision A.3.1 of the Code regarding Board service of more than nine years, the Board continued to classify him as independent, for the same reasons given in previous years’ reports, until his retirement.

From June 2002 to September 2004 Mr Kemp was temporarily Chief Financial Officer of Montpelier Re Holdings Limited (Montpelier), with which the Group’s managed syndicate has in the past had reinsurance arrangements on commercial terms. Although Mr Kemp was not involved in the negotiation of these arrangements, the Board considers that the past business relationship between Amlin and Montpelier, and the current potential competition between Amlin Bermuda Ltd and Montpelier, of which Mr Kemp remains a non-executive director, are sufficiently material for Mr Kemp to be classified as non-independent.

Board information and professional development

In addition to information about the Company, all directors are provided with written materials on their responsibilities as directors of a public company and on other relevant regulatory, legal, accounting and insurance industry matters. Updating sessions on technical and/or industry matters are included in the Board programme as required. During 2006 a Board session was conducted on the Companies Act 2006 and on recent and prospective changes to the FSA’s Listing Rules and the Disclosure Rules. In addition, the Company encourages, facilitates and monitors other professional development undertaken by both executive and non-executive directors as is required for their particular roles and responsibilities. The Company maintains a model director induction programme, which is tailored to meet the needs of each new director joining the Board. Both Mr Davey and Sir Mark Wrightson, who joined the Board in December 2005 and March 2006 respectively, undertook the programme in 2006.

Board evaluation

During the year the Board undertook its third annual evaluation of the performance of the Board, its Committees and each director. The evaluations were initiated by a comprehensive questionnaire completed by each director giving his assessment of both collective and individual performances, including self-evaluation. The results of the evaluation of the Board as a whole were summarised by the Chairman and, at its meeting in February 2007, the Board agreed its conclusions. Each Board Committee evaluated its performance, and also reported and discussed its findings at the Board.

The Chairman also discussed the conclusions on each individual director, including the performances of executive directors in respect of their boardroom as opposed to executive roles, at private meetings with the director concerned. Executive directors’ managerial roles continue to be assessed as part of the Group’s executive Performance Development Review process, in respect of which the Chief Executive’s performance is reviewed by the Chairman.

The Chairman’s own evaluation was conducted by the non-executive directors led by the senior independent non-executive director, who discussed and agreed the conclusions with the Chairman.

The evaluations are also taken into account by the Nomination Committee when considering specifications for new non-executive directors, succession planning and nominations for re-election at AGMs.

Relations with shareholders

The Company is committed to a process of continuing dialogue with its shareholders. In addition to usual briefings on financial results, the Company makes appropriate contact with institutional investors and their representative bodies, for instance on the new incentive plans proposed at the 2006 AGM. Shareholder views on the Company are the subject of specific reports at Board meetings at least twice annually and an independently conducted survey of institutional shareholders’ investment criteria, and their perceptions of the Company, its management and its investor communications, is conducted approximately every eighteen months. Further details of investor relations activities are included in the relevant section of the Operating and Financial Review.

Annual General Meeting participation and voting

Shareholders are encouraged to attend the Annual General Meeting, when a presentation on the Group’s progress is made each year. The Company attaches importance to encouraging a high level of voting participation at its general meetings, receiving proxies representing 76%, 74% and 77% of its shares in issue at its 2004, 2005 and 2006 AGMs respectively. Electronic proxy voting, details of which are included in the 2007 AGM circular and Notice of Meeting, is made available. The totals of proxy votes on each resolution, including details of any votes withheld (i.e. deliberately abstained), are announced after each resolution has been dealt with on a show of hands and the full proxy voting results also announced through a regulatory news service and on the Company’s website. In the event of a close result as indicated by the proxies held by the chairman of the meeting, the chairman would call a poll, but this has not yet proved necessary.

Accountability and internal control

The Company has an ongoing process for identifying, evaluating and managing its significant risks. This process has been in place throughout the year and up to the date of approval of the Annual Report. The process and its findings are regularly reviewed by the Audit Committee, which reports on the matter to the Board, and accords with the guidance in the document ‘Internal Control: Revised Guidance for Directors on the Combined Code’ published by the Financial Reporting Council in October 2005. This process explicitly includes the risks, and opportunities to enhance value, arising from social, environmental and ethical matters. The directors are responsible for the Company’s systems of internal control and for reviewing the effectiveness of these systems, which are designed to provide reasonable, but not absolute, assurance against material avoidable loss or misstatement of financial information. They are also designed to manage rather than eliminate the risk of failure to achieve business objectives. Other procedures which may assist the effectiveness of internal controls, such as ‘whistle blowing’ procedures whereby any member of staff may take matters of concern direct to the head of Internal Audit or, if appropriate, to the Chairman of the Company or the senior independent non-executive director, have been put in place and are reviewed annually.

Necessary actions have been or are being taken to remedy any significant identified control failings or weaknesses. The Board has put in place a management structure with defined lines of responsibility and delegation of authority. The Group also operates a financial performance monitoring process involving detailed reporting against budgets and the preparation of longer term projections. The Board receives regular reports from the Audit Committee which reviews the following main processes established by the Company to review the effectiveness of internal control:

• Regular reporting by each division and central function through an integrated risk management system on the main risks to the achievement of Group objectives and on the nature and effectiveness of the controls and other management processes to manage these risks. Significant risks and the actions taken to manage those risks are regularly reviewed by the Group’s Risk Committee which comprises senior executives. The Risk Committee reports to each meeting of the Audit Committee.
• A self-certification process whereby senior managers report on those parts of the systems for which each of them is responsible.
• Internal audit and compliance monitoring work carried out respectively by the Group’s Internal Audit and Risk Assessment and Monitoring departments. The latter also provides compliance advice. The heads of both departments report to the Group Chief Executive and the head of Internal Audit also has a direct reporting line to the Audit Committee. The Group has established a continuous audit and compliance programme for reviewing and evaluating the internal controls and compliance procedures used in the management of risk.

Going concern

The Board has satisfied itself that the Group has adequate resources to continue in operation for the foreseeable future. The Group financial statements therefore continue to be prepared on a going concern basis.

By Order of the Board

C C T Pender Secretary
2 March 2007

© Copyright Amlin 2006