A French regulator is pressuring the country's largest insurers to separate their chairman of the board and chief executive roles in order to reduce the level of power and influence one person wields over the company.
The French Prudential Supervision and Resolution Authority issued a report pressing insurers to make the change, following controversy surrounding the chairman and CEO roles at Scor and Covéa, two of the country’s largest insurers.
The authority urged all companies under its supervision to "improve their governance arrangements," but said this is "of particular importance in complex or large groups."
Denis Kessler currently serves as Scor's chairman and CEO, and Thierry Derez does the same at Covéa. They have received criticism in France for their supervisory structure and failure to separate the top functions.
The authority said in the report that greater oversight and multiple leaders of a company is generally regarded as a "good practice" and preferred by investors. There is no formal rule requiring it in the European insurance sector, but it is being strongly recommended.
As such, the move to split the top roles at large, public companies has gained a lot of ground in the last few years. It is a more common practice in Europe than in the U.S., and Axa, the largest insurer in France, separated its CEO and chairman roles in 2016.
Other French companies that have split the jobs recently include food and manufacturing firms like Danone, Renault and Safran. In the U.S., Wells Fargo, Tesla and Boeing have all separated their top roles in the last five years, all following company leadership scandals.
But U.S. insurers are split on the separation practice. Warren Buffett serves as the CEO and chairman of Berkshire Hathaway, and Charles Lowrey holds the same roles at Prudential Financial, as does Michael Tipsord at State Farm. MetLife, UnitedHealth and Blue Cross Blue Shield have all separated the roles between two people.
Following the report's release on Wednesday, Scor's Kessler told the French financial newspaper Les Echos that the company has so far determined that its type of governance is working smoothly. He also said that Scor's shareholders rejected the idea of splitting the top roles by a large majority in 2019.
The French authority said that even without formal laws to require change, it expects the separation of CEO and chairman to become the standard at large insurance companies. It explained that an essential principle of regulation allows a firm's supervisory body to monitor the actions of the chief executive without any conflicts of interest.