__MAIN_TEXT__

Page 1

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Separate and Consolidated Financial Statements 2019 Incorporating a strategic and financial review for the year ended 31 December 2019

1


Contents Governance structure.............................................................................................................................................................. 3

Board composition.................................................................................................................................................................. 4

Board and Committee Reports........................................................................................................................................ 5

Strategic and financial review......................................................................................................................................... 19

Independent auditor’s report......................................................................................................................................... 27

Statement of comprehensive income....................................................................................................................... 29

Statement of financial position.................................................................................................................................... 30

Statement of changes in funds....................................................................................................................................... 31

Statement of cash flows..................................................................................................................................................... 32

Notes to the separate and consolidated financial statements................................................................ 33

Reference and administrative details...................................................................................................................... 54


3

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Governance Structure For the year ended 31 December 2019 The governance structure of the Chartered Insurance Institute (‘the CII’ or ‘the Institute’) ensures that the purpose and powers prescribed by its Charter and Bye-laws are underpinned by appropriate scrutiny and delegation. A diagrammatical representation is set out below.

CII Board

Local Institute National Forum

Education and Learning Committee

Professional Standards Committee

Audit and Risk Committee

Nominations and Remunerations Committee

Exective Management Team (EMT)

Independent Review Pool Key Governance Board and Committees

Exective Management Team (EMT)

Independent Review Pool

EMT Operational responsibility

Forum NB The EMT feeds into the Board, Committees and Local Institute National Forum


4

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

The Board Composition For the year ended 31 December 2019 The Board is the Institute’s governing body and its role is to promote the long-term sustainable success of the CII and to generate value, so that we are able to meet our public interest requirement as established in our Royal Charter. It achieves this by driving strategy, ensuring the Institute has the resources, culture and controls in place to meet its strategic objectives and ensuring effective engagement with members and wider stakeholders. The Board delegates responsibility for the day to day management of the CII to the Executive Management Team (EMT) of the Institute, which is headed by the Chief Executive Officer.

The composition of the Board during the year ended 31 December 2019 was: Board members

Designations

Role

Date Of Appointment

Retirement Date

Nick Turner

APFS

President (2019/20)

July 2018

5 out of 7*

Jonathan Clark

MA, MSc, Dip Eng, ACII, FCILA, Chartered Insurer, Chartered Loss Adjuster

Immediate Past President (2019/2020)

August 2017

5 out of 7

Dame Inga Beale

ACII, Chartered Insurer

Immediate Past President (2018/19)

July 2016

Julie Page

ACII, Chartered Insurance Practitioner

Deputy President (2019/20)

June 2019

3 out of 3

Callum Beaton

FCII, Chartered Insurer

Constituency Member

November 2017

5 out of 7

John Bissell

ACII, MBA

Chief Operating Officer

January 2017

7 out of 7

Ian Callaghan

BA(Hons), FCII, Chartered Insurance Practitioner

Constituency Member

November 2015

6 out of 7

Alan Clamp

MA, PGCE, MBA, PhD

Committee Chair

May 2018

Formerly coopted member

5 out of 7

Sara Fardon

FCII, FCMI, Chartered Insurance Broker

Employer Member

March 2013

Retired . March 2019

3 out of 3

Sian Fisher

BA(Hons), ACII, Chartered Insurance Practitioner

Chief Executive Officer

February 2016

David Hertzell

Solicitor

Lay Member

July 2017

Retired December 2019

6 out of 7

David Ross

ACII, Chartered Insurance Practitioner

Council Member

November 2016

Resigned June 2019

1 out of 4

Roger Sanders

OBE, Cert. PFS

Committee Chair

July 2018

Formerly coopted member

7 out of 7

Richard Salmon

FCII, Chartered Insurer

Constituency Member

November 2017

5 out of 7

David Smith

Chartered Engineer

Committee Chair

October 2015

6 out of 7

Richard Webb

FPMI

Lay Member

December 2013

Retired . June 2019

Meeting Attendance*

4 out of 4

7 out of 7

Retired December 2019

* Number of meetings attended of those eligible to attend. The Board met seven times during 2019.

7 out of 7


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

5

Board Report For the year ended 31 December 2019 The Board held five formal meetings during 2019, plus two strategy days. The Board receives a number of standing reports at each meeting, including reports from the Chief Executive Officer, the Finance Department and Risk Department, as well as reports from its Committees. The Chief Executive of the Personal Finance Society also provides a regular report, with the Vice President of the Local Institutes reporting on Local Institute events and feedback twice per annum. Key areas of Board focus during the past year have been: 1. Continued oversight of the Business Transformation Programme which is modernising the CII’s systems and processes. 2. Gaining approval for a revised set of bye-laws. These bye-law changes involved an extensive consultation process with CII members ahead of their approval at the June 2019 Annual General Meeting (AGM), and their subsequent approval by the Privy Council. . These governance changes will enable the appointment of an Independent Chair during 2020 and, as vacancies arise, four Engagement Board members to ensure that the voice of the members are represented during Board discussions and decisionmaking. These positions are being advertised, with appointments being made on merit in accordance with an agreed, rigorous and transparent procedure. 3. Giving consideration to a report on the CII’s Risk Culture and agreeing a number of actions in response to the findings. 4. Approving a 10-year vision and changes to Corporate Chartered Status, and new Disciplinary Regulations and Procedure Rules. 5. Approving the Business Plan and Budget for 2020, the fourth year of the current Five-Year Strategic Plan. 6. Approving an investment policy and appointment of external investment managers for a proportion of the proceeds from the sale . of the Aldermanbury building which were received in October 2018. 7. Considering options for the future of the CII Pension Scheme 1993 (‘the Scheme’), including the option of a formal transfer of . the Scheme. In addition to formal meetings, the Board held two strategy days with the CII’s Executive Management Team in February and October. These focussed on the CII’s strategy and the detail of the business plan to support this, including activity to develop the CII’s international offering in line with the strategy agreed in 2018. These strategy sessions provide the opportunity for the Board, who are largely nonexecutive members, to consider the CII’s strategic direction in more detail, and to provide context to their decision making. 2019 saw a number of personnel changes to the Board. Dame Inga Beale retired following the end of her term as Immediate Past President, while Sara Fardon, David Ross and Richard Webb ended their tenures in March, June and December respectively. David Hertzell also retired as Board member and Chair of the Professional Standards Committee in December and we are delighted to welcome Jennette Newman, Partner at Clyde & Co Law Firm, to the Board as Chair of the Professional Standards Committee in January 2020. The CII extends its gratitude and best wishes to all Board members, past and present, for the time and expertise they have individually and collectively given for the benefit of the CII, its members and other stakeholders. We are particularly grateful to Dame Inga who has continued to champion and advocate one of our key initiatives, Insuring Women’s Futures. As well as Jennette Newman, the CII was also very pleased to welcome Julie Page as Deputy President in June 2019. Nick Turner transitioned from Deputy President to President at the close of the June AGM and Jonathan Clark became Immediate Past President, the last year this latter role will be a Board position.


6

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Audit and Risk Committee (ARC) The Audit and Risk Committee’s role is to provide scrutiny, oversight and assurance of risk control and governance processes to ensure that the CII Group (CII and its subsidiaries) has sound and effective systems of risk management and internal control. As part of this role, during 2019 the ARC has directed particular focus on the CII’s Business Transformation Programme, scrutinising both its deliverables and finances. It also reviewed an assessment of the CII’s Risk Culture, including associated actions before it was considered by the Board, along with comprehensive risk management reports, new and revised risk policies.

Membership and Meetings The Committee’s chair is Roger Sanders, the Director of Workplace Distribution and Allied Industry Affairs at the Lighthouse Group Plc. All members of the Committee are independent non-executives. The composition of ARC during the year was as follows: Committee members

Experience

Date of appointment

Meeting attendance

Roger Sanders OBE CertPFS (Chair)

Financial Services, Pensions and Investments

July 2018

4 out of 4

Alan Hind BSc (Hons), DipAcc, CertPFS, CA

Accounting & Auditing

July 2013

2 out of 4

Carol Collins ACII, BBS (Hons), Chartered Insurance Practitioner

Risk

July 2013

3 out of 4

*Richard Webb FPMI

Risk

March 2015

4 out of 4

Stephen Moore MSc, BA, CMIIA, CISA

Internal Audit/IT Audit and Cyber Security

July 2013

2 out of 4

Annie Tay MAppFin, FIA, CERA

Actuarial and Risk

November 2019

1 out of 1

*Richard Webb retired in November 2019.

A successful recruitment campaign was undertaken in 2019, with four new members appointed who will join the ARC during 2019 and 2020 as existing members complete their terms, to maintain the Committee’s collective skills and experiences. The Committee met on 25 March 2019, 18 June 2019, 9 September 2019 and 19 November 2019. Regular attendees at the Committee include the Chief Executive Officer, Chief Operating Officer, Company Secretary, Finance Director and Risk Director. The external auditor (BDO) attended the March 2019 and November 2019 meetings.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Audit and Risk Committee (ARC) continued ARC business The Committee has, as standing items at all its meetings: 1. A review of the CII’s key risks; 2. The most recent monthly finance report; 3. Progress reports on the CII’s Business Transformation Programme Project; 4. Business operations update; and 5. A report on current issues from the Chief Executive Officer. In addition, during the year the ARC: 6. Considered the Group Annual Report and Accounts for 2018 for CII Board sign-off; 7. Reviewed cyber security, mitigating actions and improvement areas; 8. Agreed the scope and approach to the 2019 audit plan proposed by the external auditor, BDO, and the auditor’s remuneration; 9. Reviewed the business plan, budget and the key risks to the achievement of the plan; 10. Considered the settlement and future plan for The Education & Training Trust of the CII charity; 11. Recommended the appointment of Quilter as investment fund manager in accordance with the CII’s investment policy, for the approval of the CII Board; 12. Monitored the organisational risk appetite via the limits set around key performance indicators; 13. Reviewed the progress of the Business Transformation Programme and received regular external oversight of the project from Grant Thornton. This included a lessons learnt review; 14. Reviewed the CII’s risk culture assessment and approved the plans for the implementation of the review’s recommendations; 15. Considered the CII Group’s insurance arrangements and approved renewal of its insurance policies for 2020; and 16. Approved various risk policies for onward approval of the Board. An important matter for the Committee to consider each year is the independence and effectiveness of the external auditor. The Committee is satisfied with the quality of the external audit and believes that it is able to take a measured and diligent view of the quality of financial and other systems of reporting and control within the CII. It is satisfied that the CII has appropriate systems of internal control that work effectively. The CII currently has no internal audit function and whether this will be required will be given due consideration by the Committee in 2020. The ARC is responsible for monitoring the ongoing effectiveness of the CII’s governance regime.

7


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Audit and Risk Committee (ARC) continued Risk assessment and management The ARC has provided oversight of reviews conducted by management into areas relevant to the risks facing the CII. It has constructively challenged management and received a high level of cooperation and support from all concerned. Responses to challenge and audit recommendations are generally positive and the Committee is satisfied that management within the CII is committed to maintaining an appropriate level of internal control and prudent use of its resources. As part of its role, the Committee oversees the identification, mitigation and control of risk and the processes which support risk management. The Committee considers the changing nature of the risks to the CII and seeks to ensure that these are identified, monitored and effectively controlled.

8


9

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Education and Learning Committee (ELC) The role of the ELC is to ensure the relevance, accessibility and quality of the CII’s learning and assessment products whilst maintaining processes which are transparent, fair to candidates and compliant with our regulators’ requirements. The ELC is a committee of the Board. Alan Clamp is the Chair of the ELC as well as a member of the CII Board. The composition of the ELC during the year was as follows: Committee members

Experience

Date of appointment

Meeting attendance

Alan Clamp MA, PGCE, MBA, PhD

Chair

January 2017

4 out of 4

Callum Beaton FCII, Chartered Insurer

General Insurance

September 2014

4 out of 4

Mark Davies ACII, FPFS, Cert SMP, MSc, BA, Chartered Insurer

Financial Planning

September 2014

4 out of 4

*Guy Morgan ACII, Chartered Insurer

General Insurance - Claims September 2015

0 out of 4

Dawn Teague FCII, DipPFS, CertCII (MP), Chartered Insurance Practitioner

General Insurance

September 2016

4 out of 4

Anthony Ward FPFS, BSc, Chartered Financial Planner

Financial Planning

January 2016

1 out of 4

Malcolm Brown LL.B, ACII Chartered Insurer

Accreditation Panel

September 2018

3 out of 4

Samantha Ridgewell CIPD, ACII

Education & Learning

March 2019

3 out of 4

Rob Jones BCom, FCA, DBA

Higher Education

March 2019

4 out of 4

* Guy Morgan resigned in June 2019.

ELC business There were four meetings during the year. The significant issues considered by the Committee during 2019 were: 1. The ELC received a presentation on ethics in learning and assessment and discussed developing ethics as part of a continuing professional development programme and making part of the business ethics programme compulsory for Chartered status. 2. The ELC received a presentation on routes to fellowship and was asked to set up a working group to explore ways that the CII can modernise fellowship and recommend development steps for fellowship awards. 3. The Statement of Compliance received a good compliance confidence report and was approved by the ELC for recommendation to the CII Board. 4. The ELC received an update on the audit review activities which are overseen by the Awarding Organisation Panel and recommended the implementation of the planned audit programme. 5. The ELC reviewed the awarding organisation risk register in order to consider the top risks and the implementation of the action plans. 6. The ELC discussed the CII’s qualifications in other countries and equivalence. 7. The ELC considered and recommended the preferred provider for the assessment delivery platform and assessment test centres for approval by the Board. 8. The ELC received a scoping paper on how to improve the understanding of professional standards and ethics in order to increase public trust. 9. The ELC was presented with a market overview on apprenticeships and was particularly interested in the External Quality Assurance (EQA) proposal for the CII to consider External Quality Assurer status for insurance apprenticeships, to safeguard quality. 10. The ELC received a presentation on the qualifications framework and discussed how the framework currently works and relates to other learning services and products. 11. The ELC was presented with an overview of the current ‘digital first’ approach to student learning provision and discussed the potential to move to ‘digital only’ learning.


10

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Professional Standards Committee (PSC) The Professional Standards Committee (PSC) oversees CII activities in building, promoting and protecting professional standards throughout the insurance and financial planning sectors. Its primary responsibility is to promote and support professionalism, including competence and ethical behaviour across CII membership in order to engender public trust.

Committee membership During the year, the Committee was chaired by David Hertzell, a member of the CII Board. The composition of the PSC during the year was as follows: Committee members

Experience

Date of appointment

Meeting attendance

David Hertzell

Independent NonExecutive Chair

January 2014

4 out of 4

*Sue Lewis MSc

Consumer Representative

April 2012

1 out of 1

*Teresa Hunter MA

Consumer Representative

April 2012

1 out of 1

Nick Hankin BA, ACII, MBA, Chartered Insurer

General Insurance

November 2015

3 out of 4

Lillian Boyle LLB, FCII, TEP, Chartered Insurer, Chartered . FCSI, FIoD

Life and Pensions

January 2016

3 out of 4

Gary Bottriell FPFS, Chartered Financial Planner

Financial Planning

January 2016

3 out of 4

Julie Robson (Dr) BA(Hons), PhD, SFHEA, ACII, Chartered Insurance Practitioner

General Insurance

April 2016

4 out of 4

Kate Wellington LLB, BCL

Independent Consumer Representative

June 2019

4 out of 4

James Daley BA (Hons) PG Dip

Independent Consumer Representative

June 2019

4 out of 4

Mark Butterworth BA, MBA, FCII FIRM

Commercial Representative

June 2019

4 out of 4

*Sue Lewis and Teresa Hunter retired from the Committee in April 2019

The CII Professional Standards Director, Melissa Collett, attended all meetings of the PSC. Other members of the senior management team attended meetings to discuss particular topics. Three new members were appointed to the PSC during 2019 following a recruitment campaign in early 2019: Kate Wellington and James Daley for the independent member roles and Mark Butterworth for the commercial role. Also, following approval of the new governance arrangements at the CII’s AGM 2019, a Local Institute National Forum (LINF) representative, Jamie Lewis, was appointed and will join the Committee in February 2020. David Hertzell retired from the Committee on 1 January 2020, and Jennette Newman was appointed as his successor as Chair of the PSC with effect from 1 January 2020. The CII would like to record its sincere thanks to David, Sue Lewis and Teresa Hunter for their expertise and contribution to the work of the Committee.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

11

Professional Standards Committee (PSC) continued PSC business There were four meetings during the year. Key matters considered during the year were: 1. The PSC reviewed the standards underpinning Corporate Chartered status as part of the market-wide consultation and formed a working group to inform the key recommendations. The outcome of this work was the publication of the report, ‘Corporate Chartered Status: the next 10 years’ on 1 May 2019. 2. The PSC received and provided feedback on an update on the plan for implementing the changes to Corporate Chartered status following the consultation and a detailed report about how the CII protects Corporate Chartered status. 3. The PSC received and reviewed a scoping paper on how to improve the understanding of professional standards and ethics within the profession in order to increase public trust. This follows on from the review of the standards of Chartered firms; the scoping paper proposed reviewing the standards of individual members including Chartered members. 4. The PSC considered the proposal for a formalised process for handling complaints against Chartered firms and provided feedback. 5. Following a consultation and a review of the CII’s disciplinary process, the PSC approved the new disciplinary rules and sanctions matrix. The new rules will create a swifter disciplinary process that carefully balances legal requirements, fairness, cost and speed of resolution. 6. The PSC received and made suggestions on a report setting out the vision and the strategic priorities for the Professional Standards function in 2019-2020. The vision is for levels of professional standards over time in insurance to achieve parity of esteem with the ‘established’ professions of medicine, accountancy, engineering, law, surveying, teaching and will be delivered through a focus on two key strategic priorities: (i) building, promoting and protecting standards externally and (ii) providing assurance on CII’s internal standards. 7. The PSC received a report on the proposed process and criteria for admitting international institutes for affiliated institute status and discussed the CII’s oversight of the existing affiliated institutes and any potential reputational risks. The PSC provided feedback and suggestions around the management of associated risks. 8. The PSC discussed and noted the professional implications of the continued controversy around defined benefit pension transfers. 9. The PSC considered the possible changes needed to all individual Chartered titles to give clarity on the criteria and the plans to roll out the new Chartered Underwriting title to individuals and corporate firms.

The PSC was also briefed on, and discussed: 1. The work of the CII as an FCA Accredited Body; 2. The CII’s contribution to the Financial Services Skills Taskforce Work on Financial Skills; 3. The launch of Money and Pensions Service; 4. Work with Government Equalities Office to coordinate work on Insuring Women’s Futures; 5. The Public Trust Index; and 6. The FCA’s Duty of Care work.


12

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Nominations and Remuneration Committee The aims of the Nominations and Remuneration Committee (NRC) are to: 1. Provide independent oversight of the agreed nominations framework and to recommend the process for nominations to achieve fairness and equity in the process and its application; 2. Agree a remuneration framework to achieve a balance between a justifiable level of attraction or retention and considerations of fairness to individuals, whilst ensuring that frameworks do not result in excessive rewards or lead to a reward for failure.

Membership The Committee comprises five members, all of whom are independent non-executives. It is chaired by David Smith, a Board member. The composition of NRC during the year was as follows: Committee members

Experience

Date of appointment

Meeting attendance

David Smith, C.Eng, Chartered Engineer

Independent NonExecutive Chair and CII Board member

November 2017

4 out of 4

Karen Carlton MA, D Univ., Chartered Fellow of the CIPD

Independent member

January 2014

3 out 4

Ian Callaghan FCII BA (Hons), Chartered Insurance Practitioner

Constituency Member

November 2017

4 out of 4

Jonathan Clark MA, MSC, Dip Eng, ACII, FCILA, Chartered Insurer, Chartered Loss Adjuster

President (2018/2019)

August 2017; retired June 2019 following the appointment of Julie Page as Deputy President

2 out of 2

Nick Turner APFS

President 2019/20

July 2018

2 out of 4

Julie Page ACII

Deputy President 2019/20

June 2019

1 out of 2

Nominations The Committee is responsible for the following areas in relation to nominations: • Agreeing the Nomination and Appointment Guiding Principles for Board and Committee roles, namely: fairness, merit, proportionality, openness and transparency, diversity, strategic, confidentiality; • Nominating candidates to fill vacancies on the Board and its Committees, ensuring that the processes for these appointments follow these Principles and the most suitable candidates are appointed; • Considering succession planning for the non-elected members of the Board and its Committees, taking account of the findings of any reviews of Board effectiveness in determining skills and expertise required; • Recommending to the Board, the process to be used to identify suitable candidates for the key roles of President and Chief Executive Officer, and nominating individuals for these roles; and • Recommending to the Board candidates for Honorary Fellowship.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

13

Nominations and Remuneration Committee continued Remuneration The Committee has adopted a Remuneration Policy setting out the CII’s overall approach to remuneration for its UK and international people. The Policy is based on the following principles: fairness; equity; remuneration reflecting performance; independent oversight; strategic, enabling the CII to meet its targets; and transparency. The Committee is responsible for the following: 1. The Committee makes recommendations to the Board in respect of the remuneration and pension arrangements for the executive members of the Board (currently the CEO and COO) and ensures these arrangements are clearly aligned to delivery of the CII strategic plan whilst respecting the principles of good corporate governance. 2. It reviews and makes recommendations on the appropriateness and relevance of the remuneration framework for CII staff in general and approves the design of any bonus schemes and/or performance related pay. 3. Consideration of variable pay always references the need to ensure that any performance measurements based on the financial success of the Institute do not inappropriately encourage opportunism and short-term behaviours, and rewards diversity and inclusion as part of overall performance.

Executive Remuneration The CII’s typical remuneration package includes salary, pension, benefits, bonus and Long-Term Incentive Plan (LTIP) for members of the Executive Management Team (EMT) which seeks to reward attainment of the EMT’s objectives in reinforcement of the business strategy. Depending on the nature of the individual’s role, the size and balance of the package may differ to ensure that the total package is competitive and encourages the right behaviours – including avoiding any undue risk. The remuneration mix for each role and employee broadly reflects market practice for their role. The Committee approves the design of the annual bonus scheme for the CEO and EMT, including the terms of all LTIP agreements which are in place to retain and reward long-term performance to mitigate opportunism. The Committee determines an appropriate balance of performance measures, targets and awards for these bonus schemes.

Gender Pay Gap 2019 The CII has continued to work to reduce its gender pay gap. The mean gender pay gap at April 2019 was 14.8%, down from 28% in April 2017. The CII’s understanding of the scale and nature of the problem, and the tools needed to address it, has enabled it to achieve this progress – and this work continues towards eliminating gender and pension contributory pay gaps to ensure equality.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

14

Nominations and Remuneration Committee continued Committee business The Committee’s work during 2019 included the following:

Nominations: 1. Agreement of the 2020/21 Board and Committee Nomination and Appointment Guiding Principles; 2. Agreeing a recruitment process for the appointment of a number of new Board roles following Privy Council approval of the new CII Bye-Laws; including an Independent Chair of the Board and Engagement Board Members to be appointed in 2020 in line with these Principles. 3. Approving the Board and Committee competency framework to assist in the selection of appropriate candidates and in the assessment of ongoing performance; 4. Approving appointment and recruitment plans for the Committees, including new Local Institute National Forum representatives, and nominating a new Chair of the Professional Standards Committee to the Board for approval; 5. Overseeing the process and nominating the deputy president designate for 2020/21; 6. Recommending to the Board for approval, the award of an honorary fellowship; and 7. Considering the Management succession and contingency plan.

Remuneration: 1. Agreeing the 2020/21 Remuneration Policy; 2. Approving the CEO’s salary and annual bonus 2018, including LTIP award; 3. Approving the Managing Director of Engagement’s LTIP award; 4. Approving the COO’s annual bonus 2018 and new LTIP award for 2019-2023; 5. Approving the annual bonus scheme for the Executive Management Team; 6. Approving the bonus schemes for the International and UK Sales Teams; and 7. Approving a market inflationary increase for all staff excluding EMT and SMT.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

15

Independent Review Pool (IRP) The Independent Review Pool’s remit derives from the Professional Standards Committee (PSC). The role of the IRP is to: 1. Implement the Disciplinary Regulations and Procedure Rules relating to disciplinary matters; 2. Convene a panel of IRP members to consider and determine complaints made against current or former CII students or members and, where upheld, to decide appropriate disciplinary action in relation to the Respondent; 3. Convene a panel to hear any appeals against the decisions of a panel established to hear a disciplinary complaint; 4. To establish a panel from within the IRP membership, to undertake a periodic review of decisions made by disciplinary panels or Case Examiners. The membership of this panel is selected according to the Terms of Reference of the panel, and members are appointed for a term of three years subject to a maximum of two terms. The Panel is known as the Disciplinary Decision Review Panel (DDRP); 5. To establish a sub-committee from the IRP membership to consider membership eligibility cases where they fall outside of the scope delegated to CII staff to resolve. The membership of this sub-committee is selected according to the Terms of Reference of the subcommittee, and members are appointed for a term of three years subject to a maximum of two terms. The sub-committee is known as the Membership Application Sub-Committee (MASC). The IRP is composed of CII Members, Lay Members and legally qualified members. Both DDRP and MASC have a permanent legally qualified Chair. All the members of the IRP are volunteers.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

16

Independent Review Pool (IRP) continued IRP Membership during 2019 IRP Members

Designations

Amanda Dean Barry Neaves

BA(Hons), FCCA

Belinda Schofield

Solicitor (DDRP Chair)

Catherine Shewan

Solicitor BA(Hons)

Dawn Teague

FCII, DipPFS, CertCII (MP), Chartered Insurance Practitioner

Gail Mortimer

BA(Hons), PGCE, MA

Graham Briscoe

C.Eng, CITP, CMC, FBCS, FIWFM, FMC

Hiroo Chothia

FCMI, FIC, MBA, MIoD

Jan Staniforth

FCII, Chartered Insurance Broker, FICA Dip (Comp)

John Elliott

BA (Hons), Barrister (MASC Chair)

Karen Stokes

Chartered Linguist, FCIL, MITI, MA (Oxon), MA (City), DipTrans IoLET

Keith Torrance

FCII, DMS, MCMI, Chartered Insurance Practitioner

Ken Matlin

JP, MSc, BSc (Hons), ACII, ACIArb, Chartered Insurer and Chartered Mediator

Martin Havelock

Barrister (non-practising), MCIArb

Paul Harris

BA(Hons), ACII, Chartered Insurer

Peter Kyle

MBChB, FRCS

Peter Taylor

Solicitor (retired)

Robert Weald

FCII, Chartered Insurance Risk Manager

Roderic Rennison

FCII, FPMI, FPFS, Chartered Financial Planner

Stephen Wilkinson

FCII APFS Cert CII (MP & ER) CFP Chartered MCSI Chartered Financial Planner

Tom McGrath

CBE, FCII Chartered Insurance Broker

Trevor Jones

Solicitor

MASC Report The Membership Application Sub-Committee (MASC) screens membership eligibility cases by forming panels who come to a decision electronically and meets in person on an annual basis. There were 11 cases determined during 2019. The MASC Chair reports to the PSC and submits an annual written report; the last report being presented to the PSC meeting held on . 2 September 2019. Trevor Jones resigned as Chair of MASC during the year and John Elliott was appointed as Chair.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

17

Independent Review Pool (IRP) continued DDRP Report The Disciplinary Decision Review Panel (DDRP) met three times during the year to review cases considered by Case Investigators and the Case Examiners. The papers presented at each DDRP meeting include a schedule summarising all 2018 and 2019 cases as at the date of the meeting that had been the subject of consensual orders, together with a schedule of all cases that had been rejected on grounds of no case to answer or insufficient evidence for the same period. The DDRP have therefore reviewed the summaries of all the finalised cases in the past year and up to July 2019, the date of the last meeting. In addition, a number of cases selected on a thematic basis have been the subject of detailed review and analysis by the DDRP. The themes covered have been ethical conduct, cases closed on the grounds of having no case to answer, plagiarism and collaboration. . The majority of cases considered by the DDRP were in relation to concerns due to copying of coursework. The DDRP Chair reports to the PSC and submits an annual written report; the last report being to the PSC meeting held on . 13 November 2019.

IRP Training Day The full membership of the IRP meets in person for training and consultation purposes at least annually. The IRP met for a training day on 16 October 2019, with presentations and discussions on the following matters: 1. An insightful talk explaining the academic integrity of the CII approach to plagiarism and provided an expert account of the application and use of Turnitin; 2. Insolvency (IVA and bankruptcy) - why the CII cares; the MASC rules; and approach to membership applications; 3. Mitigation and sanctions; 4. The proposed new disciplinary rules and disciplinary case law update. The IRP would like to record its sincere thanks to Jan Staniforth, Paul Harris, Trevor Jones and Roderic Rennison, who retired in 2019, for their contributions to the work of the CII.


18

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Local Institutes National Forum (LINF) The Local Institutes National Forum (LINF) is a forum made up of Regional Representatives from the local institutes to share best practice and to promote local institute interests to the CII. It was established in 2019 to build on the work undertaken by its predecessor, the Representative Council, which was disbanded in December 2018. The LINF comprises two elected representatives from each Local Institute Region as well as a representative from the Republic of Ireland (appointed by the Insurance Institute of Ireland), and is chaired by the CII Vice President for Local Institutes. The LINF provides a mechanism for the CII to consult with the local institute network, and for the local institutes to collectively discuss issues and to raise matters which it cannot resolve with the CII. A number of CII staff attend meetings, including the Director of Partnerships and Member Engagement. The CII Vice President for Local Institutes attends every CII Board meeting and reports on Local Institute matters at two of these Board meetings each year, as well as reporting back to LINF on Board business. The LINF met twice in 2019, in June and December. At these meetings, The LINF discussed the CII’s progress on delivery of its manifesto, as well as changes underway including Exam Centres, . Service Awards, Chartered and Societies, and Communication.

Membership Attendance* Chair: CII Vice President for Local Institutes

Grant Scott, ACII Chartered Insurance Broker

Elected Regional Representatives:

2 out of 2

Attendance*

Anglia

Robert Heaton

1 out of 2

Anglia

Brett Batty Cert CII

0 out of 2

London

Richard Salmon FCII Chartered Insurer

1 out of 2

London

Erik Johnson ACII Chartered Insurer

1 out of 2

Midlands

Chris Hall ACII

2 out of 2

Midlands

Juliet Williams ACII Chartered Insurance Broker

2 out of 2

North East

Richard Talbot-Jones ACII Chartered Insurance Broker

2 out of 2

North East

Ian Chapman Cert CII

2 out of 2

North West

Alex Clegg ACII Chartered Insurer

2 out of 2

North West

Ian Callaghan FCII Chartered Insurance Practitioner

2 out of 2

Northern Ireland & Isle of Man

Brian Caruth

2 out of 2

Scotland

Debbie Mitchell

2 out of 2

Scotland

George Maxwell ACII Chartered Insurer

2 out of 2

South West

Matthew Pyke

0 out of 2

South West

Richard Smith FCII Chartered Insurer

2 out of 2

Southern

Phil Bristow FCII Chartered Insurance Broker

2 out of 2

Southern

Jamie Lewis ACII Chartered Insurer

2 out of 2

Associated: Ireland

Paula Hodson FCII Chartered Insurer

2 out of 2

*Number of meetings attended of those eligible to attend during 2019


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

19

Strategic and Financial Review For the year ended 31 December 2019 Audited financial statements The audited financial statements for the year ended 31 December 2019 are included on pages 29 to 53. These Financial Statements have been prepared in accordance with FRS 102, the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland. A list of the organisations that comprise the Chartered Insurance Institute Group (‘the CII’), and which are included in these financial statements, are listed in Note 8 to the financial statements on page 43.

Financial Performance In 2019, the CII delivered improved financial performance as we continued to invest in modernising our operations and making our services more relevant and accessible for our members and insurance professionals. Operating income in 2019 is £45.2m (2018: £43.2m) which represents an increase of 5% as we continue to grow our member volumes and experience increased uptake of our qualifications and e-learning platforms. Operating expenditure of £42.9m (2018: £43.4), which includes £0.9m of continuing investment in transformation activity, decreased by 1% compared to 2018. Excluding our transformation investment, the 2019 operating expenditure of £42.0m (2018: £41.0m) is 2% higher than 2018. The increase of £1.0m was due to higher product costs in line with increases in revenue and higher staff costs in the year. The CII’s operating surplus before tax, including transformation costs, is £2.3m (2018: deficit £0.2m). The increase was driven by higher revenue and the impact of transformation costs (specifically information technology (IT) software development) which were not recorded as 2019 operating expenditure, as these costs were recorded on the balance sheet (i.e. capitalised), having met the accounting criteria of delivering future economic benefit. These costs will be recognised in the statement of comprehensive income over several years, commencing in 2020 when the new IT software is launched. Excluding the impact of transformation investment, the operating surplus before tax for 2019 is £3.2m (2018: £2.2m). The increase in the operating surplus was driven mainly by our 5% increase in revenue in 2019 partially offset by a 2% increase in operating expenditure before transformation costs. For the year ended 31 December 2019, the CII reported a total surplus before tax (which includes investment gains and a loss on fixed asset disposal) of £2.8m (2018: £1.1m). The net movement on reserves/funds is a surplus of £1.6m (2018: deficit of £2.1m) after adjustments for tax, defined benefit pension scheme contributions and foreign exchange translation. In 2019, £1.0m was paid to the CII pension scheme 1993, the CII’s closed defined benefit pension scheme, from funds held in Escrow for that purpose. The year-end financial position of the CII remains strong with total funds of £39.2m (2018: £37.6m). This level of total funds is in line with the CII’s reserve requirement which is to maintain no less than six months of operating expenditure as total funds. Our current level of total funds exceeds the six-month minimum as required by CII’s reserve policy, however, we expect the total funds to be maintained closer to the six-month threshold after further investment which is expected in the near future. In 2019, we continued to focus on our strategy through engaged membership and undertook a number of projects to deliver on this focus. The result included the launch of our new CII website in early 2020 which delivers greater functionality and an improved member experience. We also improved the relevance of our membership proposition through the launch of the Society of Underwriting Professionals and the Society of Claims Professionals and concluded the Insuring Women’s Futures initiative with the successful public launch of its manifesto proposals.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

20

Strategic and Financial Review continued For the year ended 31 December 2019 Membership At 31 December 2019, our total membership was 129,151 (2018: 127,480) which represents yet another year-on-year increase as a result of our strategy through engaged membership.

Income Revenue from membership services and subscriptions in 2019 is £19.5m (2018: £18.6m) which represents an increase of approximately £0.9m due to the continued increase in member subscriptions. Revenue from qualifications in 2019 is £14.4m (2018: £13.4m) representing an increase of £1.0m or 7% as we see growing interest in our Diploma and Advanced Diploma Insurance qualifications as well our Personal Finance Certificate level qualifications. 2019 revenue from educational activities, comprising textbooks, e-books, e-learning licences and other publications and training courses is £11.3m (2018: 11.1m), a slight increase of £0.2m or 2%. We experienced an increased uptake in e-learning activities which was partly offset by lower accreditation, as corporate accreditations were lower than 2018, although we continue to see sustained interest in individual accreditations. Geographically, our 2019 international revenue represents 10% of total revenues (2018:10%). Following the appointment of an International Director in late 2018, we have secured a partnership with the Insurance Authority of the United Arab Emirates (UAE) which allows the CII to promote Professional Standards, values and education in that region. The CII aims to secure further international partnerships in 2020.

Expenditure Total operating expenditure decreased by £0.5m or 1% to £42.9m (2018: £43.4m). Expenditure on our transformation programme in 2019 was £5.1m (2018: £3.0m) of which £0.9m (2018: £2.4m) was recognised as an expense in the statement of comprehensive income, while the remaining £4.2m (2018: £0.6m) was capitalised (recognised on the balance sheet). The reduction in our transformation cost within operating expenditure of £1.5m was partially offset by a £1.0m increase in operating costs, this was due to higher product costs in line with increases in revenue and higher staff costs incurred in the year.

Taxation The net corporation tax charge for the year was £0.2m (2018: £0.1m) mainly reflecting the higher surplus generated in 2019. Further details on the tax charge are included in Note 4 to the financial statements on page 39.

Pensions The CII operated the CII pension scheme 1993 - a defined benefit pension scheme (‘the scheme’) that closed to new entrants in 2001 and closed to future accrual in 2006. The scheme is funded in advance by contributions at rates assessed by the scheme actuary during regular funding reviews. The CII and the Trustees of the scheme previously agreed a schedule of future payments following the actuarial valuations as at 30 June 2014 and as at 30 June 2017. Contributions of £1.0m were made in 2017 and 2018, and an additional contribution of £3.0m was made in November 2018. In 2018, a further £5.0m was set aside in an Escrow account for future contributions as agreed with the scheme Trustees, from which £1.0m was paid to the scheme in November 2019. Further details are given in Note 15 to the financial statements on page 48.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

21

Strategic and Financial Review continued For the year ended 31 December 2019 Cash flow Cash and short-term deposit balances at 31 December 2019 were £37.7m (2018: £44.8m). Most of these balances are held in the form of deposits distributed between a small number of UK financial institutions to mitigate concentration risk, all within 95-day notice periods. The balance also includes an amount of £4.0m (31 December 2018: £5.0m) deposited in an Escrow account to be utilised for the closed defined benefit pension scheme, in accordance with the agreement with the scheme Trustees. Further contributions into the scheme will be considered in the future. Cash at bank totalling £3.84m belonging to The Education and Training Trust of the CII (‘the charity’) are restricted for the benefit of the charity. In 2019, changes were made to the objects of the charity to extend its reach to a wider audience. In 2020, as part of changes to the charity’s governance arrangements, it will come under the stewardship of an independent Board of Trustees who will determine the activities to be undertaken by the charity in fulfilment of its purpose. Net cash outflow for the year was £7.1m (2018: inflow £19.4m) and includes £5m purchase of investments (2018: £nil) and a £1.0m contribution to the defined benefit pension scheme as described above (2018: £3.1m). The cash inflow for 2018 included £21.0m of proceeds relating to the sale of the Aldermanbury building. Capital expenditure during the year of £4.5m (2018: £1.2m) included £4.2m investment in our transformation programme in 2019.

Investments The CII Board approved an investment strategy in 2019, to optimise surplus cash which resulted from the sale of the property at Aldermanbury in 2018. In line with this strategy, £5.0m was invested in a portfolio of financial securities which are managed by a reputable investment manager. The financial securities comprise various fixed interest and equity securities as well as investment property funds. The investment portfolio does not include derivatives. The performance of investments is reported regularly to the Audit & Risk Committee of the CII. At 31 December 2019, the investment balance stood at £5.2m (2018: £0.1m).

Reserves As at 31 December 2019, total accumulated funds amounted to £39.2m (2018: £37.6m). In planning and budgeting for its activities, the CII considers the level of reserves held in order to establish a balance between the continuing development of its services and the need for prudent management of our working assets and commitments, as well as providing for contingencies. It is the CII’s objective to generate an operating surplus to build and maintain reserves at a sustainable level, taking into account working capital requirements and key risks. The CII Board has set policies which determine that reserves amounting to not less than six month’s budgeted consolidated expenditure will be maintained by the CII. The liquid assets which comprise these reserves may be held in bank deposits and/or longer-term investment accounts managed by reputable organisations. The CII’s Board and management monitor the necessary level of reserves in view of the changing environment and strive to ensure it remains relevant to the market.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

22

Strategic and Financial Review continued For the year ended 31 December 2019 Going concern The CII have set out above a review of the financial performance and the reserves position. The CII has adequate financial resources and is well placed to manage the business risks. The business planning process, including financial projections, scenario testing and key risk identification, has taken into consideration the current and expected economic climate, and its potential impact on the various sources of income and planned expenditure. In March 2020, the UK government implemented significant measures to contain the spread of the Covid-19 virus, which had been declared as a pandemic by the World Health Organisation (WHO) during the same month. The measures implemented in the UK are similar to those implemented in many other countries around the world, and have significantly impacted many businesses, both operationally and financially. For the CII Group (including its International operations) the key impacts which have arisen or may arise include: • The cancellation of examinations and events hosted by the CII Group, in the interest of the health and safety of our stakeholders and in compliance with government guidelines to limit the risk of transmission of the virus; • The reduction to revenue which may arise from any financial difficulty which may be experienced by CII members or examination candidates or the companies which the CII serves; • The operational impact to the CII arising from the risk of staff illness; • The impact to the CII’s investment portfolio due to the global disruption to capital markets. As there remains uncertainty around the period over which governments’ measures worldwide will remain in place, the precise impact cannot be determined. However, the CII has modelled the impact of these measures to assume that certain products may not deliver revenue for the remainder of the financial year. This work concluded that, with the implementation of risk mitigation measures which are available to the Group, the CII and its subsidiaries will have sufficient liquid resources (cash and investments which can be converted to cash) to continue to operate for at least twelve months from the date of approval of these financial statements. The Executive Management Team (EMT) also considered other scenarios in which the CII may not receive the expected revenues for 2020 and cashflow as part of the 2020 Corporate Planning process and that the CII would still have sufficient resources to be able to fulfil its existing commitments for the next twelve months. The EMT and the Board remain of the view that there are no material uncertainties that call into doubt the CII’s ability to continue. The financial statements have, therefore, been prepared on the basis that the CII is a going concern.

Risk management and internal controls The CII Board has overall responsibility for risk, delegating risk management activities to the Audit and Risk Committee and Management. In addition, every CII employee has a responsibility for managing risk within their respective area. The leadership team directly controls day-to-day operations and has responsibility for designing, implementing and maintaining adequate systems and controls. The Audit and Risk Committee, supported by the Risk Director and Business Risk Group, review and ensure that the CII complies with a proportional and value-added risk framework (‘the framework’). The objective of risk management at the CII is to ensure risks and opportunities are understood, evaluated, recorded, managed and reported effectively, within a consistent and proportional framework that aligns to, and considers, the CII’s strategy, processes, people and financial resilience. The framework provides processes for reviewing the CII’s top risks and ensures that risk is an integrated part of the business planning process and decision making. The framework includes an Enterprise Risk Management policy and a risk appetite methodology. In 2018, the CII Board agreed our risk appetite statement, that sets out our general approach to risk, this being:


23

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Strategic and Financial Review continued For the year ended 31 December 2019 Risk management and internal controls (continued) • The CII will make considered risk-based decisions, to build and grow into new and existing sectors by developing relevant learning, engaged membership and insightful leadership for members and stakeholders. We will do this by living our values of being visionary, open and seeking excellence. • The CII will minimise risk by balancing cost and control, in core areas. These being the CII brand, quality of qualifications and services, member proposition and promoting professionalism. In 2019, this was supported by measurable risk appetite limits linked to the CII’s key risks and strategic measures. These were reviewed on a monthly basis by the management team and, where possible, corrective action was taken. As a body accredited by the Financial Conduct Authority (‘FCA’), the CII is also specifically required to design, implement and operate control procedures over the issuing of Statements of Professional Standing, the verification of advisers and the provision of information to the FCA as required by its rules. These control procedures are subject to an independent audit carried out in line with FCA requirements, and they are sent to the FCA and reviewed by the Audit and Risk Committee and Professional Standards Committee on behalf of the Board.

Principal risks and uncertainties The CII is affected by a number of both financial and operational risks inherent in the services, sectors and regions in which we operate. We prudently manage our financial risks (mainly credit counterparty and liquidity risk) and annually review our reserves and investment policies. As part of our business planning process we identified the top risks to the achievement of our 2020-2023 business plan, these being:

Key Risk

Risk mitigation and / or management actions

The level and pace of organisational change.

• In 2019, new change governance processes were introduced, that ensure effective prioritisation and resource allocation; • The business planning process sets priorities, and these are regularly monitored; • There is effective project governance over material projects. In 2019, this included employing independent oversight to review specific projects.

Business transformation continues, with a number of significant projects underway which will transform the way the CII operates and interacts with customers. This includes some significant IT projects. It is likely that the current level of change will be sustained over the next two years. There is a risk of undertaking too much change at once and being able to effectively manage and prioritise the changes. Current qualification levels are not maintained, or learners do not progress along the qualifications pathways as expected. There is a risk that our qualifications do not remain relevant and modern.

Inability to attract and retain members. There is a risk that our membership offering fails to be relevant and modern, and does not attract or retain members, reducing our ability to promote professionalism and standards.

• All qualifications are reviewed annually to ensure they remain relevant and modern; • Time saving study aids are provided and we continue to look at ways to enhance examination and learning experiences; • We are looking to develop a new competency-based framework incorporating knowledge, skills and behaviours; • In Q1 2020 we launched our new range of Personal Lines products, catering for a different market segment. • We maintain a professional development programme on a wide range of topics delivered through different media types; • Engagement with members via local institutes and value-added events; • Societies are now in place, providing relevant, tailored, valueadded information to members.


24

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Strategic and Financial Review continued For the year ended 31 December 2019 Principal risks and uncertainties (continued) Key Risk

Risk mitigation and / or management actions

Inability to retain UK business.

• New product and service ideas are explored and developed, via our product and proposition development process; • We are developing new, modern products in currently underserved areas (for example Personal Lines products); • Effective relationship management with clients and partners; • Scenario analyses are conducted.

There is a risk that our UK business volumes reduce if we are unable to retain and attract members/clients by not offering a range of new, modern and relevant products and services that meet the changing needs of both corporate and individual clients . Also, uncertainties over the impact of Brexit remain which may lead to a reduction in corporate clients’ learning and development budgets. Inability to achieve international growth targets by not providing relevant affordable products and a quality customer experience. Developing our International presence is our longer-term growth strategy, as this will allow us to promote professionalism to a wider audience and diversify our income sources.

• In 2018, we appointed an International Director who has strengthened the team and continues to develop and build new international relationships; • We are providing more specific relevant products for local markets and will assess the benefits of each international new product idea; • We are currently developing our systems to enhance the international customer experience; • In 2020, we will enhance the examination methods available to international students.

We are also monitoring a number of emerging risks and opportunities. These include: •E  conomic recession: A recession could lead to reduced employment and shrinking of our current and potential customer base, reducing learning and development investment and sponsorship. •M  arket consolidation: Margin and market pressures continue to drive market consolidation impacting potential members, learners, ASSESS sales and existing or potential Corporate Chartered Status holders. •T  echnology and automation: Traditional jobs are at risk of being altered or automated. This could impact negatively on learner/member attraction and retention. •D  emographic shifts and evolving workforce: Baby boomers retiring, increasing demand for new skill sets and an evolving preference towards shorter tenure jobs with people leaving the sector, could have a negative impact on membership and learner numbers. •C  onsumer expectations: Consumers seeking a personalised, quick and easy experience in all interactions could impact current CII delivery methods.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

25

Strategic and Financial Review continued For the year ended 31 December 2019 Principal risks and uncertainties (continued) Several possible management responses to these emerging risks have been formulised which include: • Diversifying income sources through new products and further international expansion; • The introduction of a Market Intelligence programme to identify potential new opportunities as conditions change; • Investigating membership and student learning propositions to cater for the changing needs of people’s diverse career routes and choices; • Continuing to develop personalised interactions with the CII, using modern and diverse means.

Budgets and financial reporting As part of the annual planning process, detailed budgets are prepared for the approval of the Board. The financial results of the CII Group, which comprise analyses of the CII Group’s financial performance and financial position, are prepared every month and reviewed by the leadership team. A report on the Group’s financial results is presented to the Audit and Risk Committee and the Board at every meeting, comparing actual results to the approved budget. Forecast financial performance is reported during the year to ensure that early action can be taken against emerging financial risks.

Our colleagues The CII aims to be an organisation where its colleagues enjoy working and where they feel supported and developed. Colleagues are kept fully informed of the organisation’s strategy and objectives, and individual performance is formally reviewed at least twice a year. Learning and development is considered as an integral part of this approach as it ensures that the right skills are developed, at the right time, through appropriate learning tools so as to meet the CII’s strategic objectives and contribute to employee engagement. The CII remains committed to people engagement and the CII continues to consult and discuss with colleagues through varied forums and holds business updates throughout the year which seek to achieve a common awareness on the part of all colleagues, including financial, economic and market factors impacting the CII’s performance. The CII’s recruitment and selection policy is designed to ensure that it selects the best possible candidate for the job, on the basis of their relevant merits and abilities, as measured against the requirements of the job, whilst following best practice of inclusive recruitment. The CII’s commitment to diversity and inclusion is embedded in its policies, procedures and practice. We continue to report on our gender pay gap and now on our ethnicity pay gap. Investors in People (IiP) is a national standard for achieving business goals through employee learning, development, involvement and engagement. We went through our IiP re-accreditation in late 2018 and we are proud to have achieved IiP GOLD.

Future plans As a Royal Charter Body, the CII’s over-arching purpose is to secure and justify the confidence of the public. In September 2016 the Board approved the “Your CII Strategic Manifesto: 2021 Roadmap” which was subsequently launched in November to the public. 2017 focussed on the ‘Discovery’ phase by researching and identifying projects for development and change. In 2018 and 2019, we progressed on key stages of our journey to the delivery phase, achieving much of what we set out to deliver, becoming more modern, relevant and diverse.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

26

Strategic and Financial Review continued For the year ended 31 December 2019 Future plans (continued) We have already begun to see positive impact on engagement and revenue from early outputs from our Transformation Programme, for example through increased digital offerings and a more engaging, accessible web experience. Along with the forthcoming changes to the Target Operating Model, including significant capability efficiencies such as CRM, these are providing the foundations for a more effective, future-oriented and resilient organisation. The way in which the CII offers services to its members will continue to focus on a Digital First mindset, not just reducing the reliance on paper and manual processes, but the delivery of the learning and membership experience to improve retention and relevance. We will be undertaking a full review of our competency framework, to expand its focus on skills and to embed the new Professional Standards Framework as a more relevant tool for individuals and businesses to navigate their learning journeys and find solutions. This will also help us to continue to identify the most relevant gaps for new propositions and markets. Aligned to our purpose, we will also engage in marketing activities which target consumer awareness to reinforce public confidence in the insurance sector. Internationally, the CII will continue its efforts to develop partnerships with other insurance professional bodies to leverage practices for the benefit of our membership. The Chartered Bodies Alliance continues to provide a forward-thinking platform for all Financial Services professionals to collaborate in pursuit of our common goals. Together we have made a significant contribution to the Treasury’s strategy via the Financial Services Skills Task Force. So far, 2020 has been unprecedented due to the outbreak of the novel coronavirus (Covid-19) which has led to significant measures being taken by governments around the world to restrict social interaction to limit the transmission of the virus, and emergency fiscal measures to mitigate the economic impact. The CII is not immune to the social measures which were implemented, however, our priority remains for the wellbeing of our members, staff, stakeholders and the general public. In compliance with government guidelines and in the interest of safety, we have postponed or cancelled several activities which would involve close contact, including some examinations and events. As a result of the investment made in our Target Operating Model over the past two years, the CII has been able to continue to operate with all staff working remotely until the government’s guidelines allow us to resume office working. As circumstances remain uncertain our plans will change to adapt to the evolving circumstances caused by the Covid-19 virus. However, the CII has adequate reserves and therefore expects to continue to operate for at least the next twelve months. The CII Board and Executive Management Team remain committed to the support of our membership and delivering the highest quality membership experience as we continue to justify the confidence of the public.

Auditor BDO LLP was reappointed as the Institute’s auditor during the year and has expressed its willingness to continue in that capacity. The Strategic and Financial Review was approved by the board on 31 March 2020.

N Turner President Date: 31 March 2020

S Fisher Chief Executive Officer Date: 31 March 2020


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

27

Independent Auditor’s Report To the members of the Chartered Insurance Institute Opinion We have audited the financial statements of the Chartered Insurance Institute (“the Institute”) for the year ended 31 December 2019 which comprise the consolidated statement of financial activities, the consolidated and Institute statement of financial position, the consolidated statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). In our opinion, the financial statements: • give a true and fair view of the state of the group’s and the Institute’s affairs as at 31 December 2019 and of its income and expenditure for the year then ended; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been prepared in accordance with The Chartered Insurance Institute’s governing charter.

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Institute in accordance with the ethical requirements relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions related to going concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: • the Board’s use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or • the Board has not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group and Institute’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information The other information comprises the information included in the Annual Report, other than the financial statements and our auditor’s report thereon. The Board is responsible for the other information which includes the Strategic and Financial Review. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

28

Independent Auditor’s Report continued Responsibilities of the Board The Board’s responsibilities for preparing the financial statements in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out below. The Charter and Bye Laws of the Institute require the Board to prepare the financial statements for each financial period which give a true and fair view of the state of affairs of the group and Institute and of the surplus or deficit for that period. In preparing those financial statements, the Board has: • selected suitable accounting policies and then applied them consistently; • made judgements and estimates that are reasonable and prudent; and • stated whether applicable accounting standards have been followed. In preparing the financial statements, the Board are responsible for assessing the group and Institute’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board either intend to liquidate the Institute or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report This report is made solely to the Institute’s board, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. . Our audit work has been undertaken so that we might state to the Institute’s Board those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Institute and the Institute’s Board as a body, for our audit work, for this report, or for the opinions we have formed.

BDO LLP Chartered Accountants Gatwick Date: 1 April 2020 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).


29

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Consolidated statement of comprehensive income For the year ended 31 December 2019

Note

2019

2018

ÂŁ000

ÂŁ000

Operating Income Membership services and subscriptions

19,468

18,647

Qualifications

14,363

13,404

Educational activities

11,332

11,112

22

14

Other activities

45,185

2

43,177

Operating Expenditure Membership services and support

(14,333)

(13,228)

Qualifications and learning

(15,866)

(14,873)

Central services

(12,656)

(15,265)

Operating Surplus/(Deficit)

3

(42,855)

(43,366)

2,330

(189)

Non operating income and costs Dividends and interest

339

177

(Loss)/gain on disposal of fixed assets

5

(21)

1,096

Realised gain on investments

7

8

-

Unrealised gain/(loss) on listed investments

7

154

(8)

31

Other

Surplus before taxation

Taxation charge

4

Net Surplus

32 511

1,297

2,841

1,108

(192)

(115)

2,649

993

(996)

(3,096)

(55)

(44)

(1,051)

(3,140)

1,598

(2,147)

Other comprehensive income Net defined benefit pension cost Foreign exchange (loss) Total other comprehensive (loss)

Total comprehensive income/(loss) for the year The notes on pages 33 to 53 form part of these financial statements

15


30

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Separate and Consolidated Statement of financial position As at 31 December 2019 Group Note

Institute

2019

2018

2019

2018

£000

£000

£000

£000

Non-current assets Tangible fixed assets

5

1,197

1,333

1,191

1,327

Intangible fixed assets

6

4,740

627

4,740

627

Investments

7

5,156

97

5,039

-

Investments in subsidiaries

8

-

-

192

192

11,093

2,057

11,162

2,146

108

96

108

-

9

6,435

6,306

8,051

8,109

10

37,663

44,787

32,962

43,881

44,206

51,189

41,121

51,990

(15,298)

(14,949)

(26,951)

(29,089)

28,908

36,240

14,170

22,901

(780)

(674)

(780)

(674)

39,221

37,623

24,552

24,373

35,013

33,427

24,552

24,373

Current assets Stocks – Course books Debtors Cash at bank and short-term deposits

Current liabilities Creditors: Amounts falling due within one year

11

Net current assets

Provisions for liabilities and charges

13

Net assets

Accumulated funds General

14

Charitable

14

Total funds

4,208

4,196

-

-

39,221

37,623

24,552

24,373

The financial statements on pages 29 to 53 were approved by the Board on 31 March 2020.

N. Turner President Date: 31 March 2020

S. Fisher Chief Executive Officer Date: 31 March 2020

The notes on pages 33 to 53 form part of these financial statements


31

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Consolidated statement of changes in funds For the year ended 31 December 2019

Property revaluation reserve

General Reserve

Total Funds

£’000

£’000

£’000

11,145

28,625

39,770

-

993

993

1 January 2018 Net Surplus for the year Movement on revaluation reserve

(11,145)

11,145

-

Employer contribution to pension fund

-

(3,096)

(3,096)

Foreign exchange loss arising from retranslation of overseas subsidiaries

-

(44)

(44)

At 31 December 2018

-

37,623

37,623

Property revaluation reserve

General Reserve

Total Funds

£’000

£’000

£’000

1 January 2019

-

37,623

37,623

Net Surplus for the year

-

2,649

2,649

Employer contribution to pension fund

-

(996)

(996)

Foreign exchange loss arising from retranslation of overseas subsidiaries

-

(55)

(55)

At 31 December 2019

-

39,221

39,221

The notes on pages 33 to 53 form part of these financial statements


32

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Consolidated statement of cash flows For the year ended 31 December 2019

2019

2018

ÂŁ000

ÂŁ000

2,841

1,108

5,6

531

1,183

7

(154)

8

13

(1,096)

(996)

(3,096)

(339)

(177)

(Increase) in trade and other debtors

(98)

(266)

(Increase) in stocks

(12)

(21)

Increase in trade creditors

592

162

(259)

1,128

15

273

Note Cash flows from operating activities Surplus before taxation Adjustments for: Depreciation and amortisation charges Unrealised investment (gain)/loss Loss/ (gain) on disposal of tangible fixed assets Employer contributions to defined benefit pension fund

15

Interest receivable

(Decrease)/Iincrease in deferred income Increase in other creditors

106

475

(55)

(44)

Cash from operations

2,185

(363)

Taxation paid

(164)

(177)

Net cash generated from operating activities

2,021

(540)

(1,249)

Increase in provisions Exchange (losses) on translation

Cash flows from investment activities Purchases of tangible fixed assets

5

(284)

Purchase of intangible assets

6

(4,246)

-

1

21,000

281

174

Proceeds from sale of tangible fixed assets Interest received Purchase of investments

7

(4,983)

-

Proceeds from sale of investments

7

86

-

Net cash from investing activities

(9,145)

19,925

Net (decrease)/increase in cash and cash equivalents

(7,124)

19,385

Cash and cash equivalents at 01 January 2019

44,787

25,402

37,663

44,787

Cash and cash equivalents at 31 December 2019 The notes on pages 33 to 53 form part of these financial statements

10


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

33

Notes to the Separate and Consolidated Financial Statements 1. Accounting policies a) Basis of preparation The Chartered Insurance Institute (CII, parent company or Institute) is a body incorporated by Royal Charter. The separate and consolidated financial statements are prepared under the historical cost convention, as modified by the revaluation of certain fixed assets, in accordance with applicable United Kingdom Accounting Standards, including Financial Reporting Standard 102 applicable in the United Kingdom and the Republic of Ireland. The preparation of the separate and consolidated financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Group’s accounting policies. The Directors have considered the impact of the measures taken in the UK and Internationally in response to the Covid-19 pandemic and concluded that the going concern assumption remains appropriate for the preparation of these financial statements. As there remains uncertainty around the period over which governments’ measures worldwide will remain in place, the precise impact cannot be determined. However, the CII has modelled the impact of these measures to assume that certain products may not deliver revenue for the remainder of the financial year. This work concluded that, with the implementation of risk mitigation measures which are available to the Group, the CII and its subsidiaries will have sufficient liquid resources (cash and investments which can be converted to cash) to continue to operate for at least twelve months from the date of approval of these financial statements. Further detail is provided in note 19 of these financial statements. Parent company disclosure exemptions In preparing the separate financial statements of the parent company, advantage has been taken of the following disclosure exemptions available in FRS 102: • No cash flow statement has been presented for the parent company; and • No disclosure has been given for the aggregate remuneration of the key management personnel of the parent company as their remuneration is included in the totals for the Group as a whole.The following principal accounting policies have been applied:

b) Basis of consolidation The consolidated financial statements comprise the financial statements of the CII and all of the entities considered by the CII to be subsidiary undertakings (the CII Group or the Group, see note 7). All have been prepared to 31 December 2019. In preparing consolidated financial statements, the financial statements of the parent and its subsidiaries are combined on a line by line basis, eliminating any intragroup balances and transactions in full. The consolidated financial statements incorporate the results of business combinations using the purchase method. In the statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases.

c) Revenue recognition Membership services and subscriptions Subscriptions Membership subscriptions are credited in the financial statements of the period in which they are received to the extent of the proportion of the subscription year remaining, and the remainder in the financial statements of the following period.

Examinations Examinations and accreditation Examination and accreditation fees are credited in the financial statements of the period in which the examinations and accreditations take place.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

34

Notes to the Separate and Consolidated Financial Statements continued c) Revenue recognition (continued) Educational activities Coursework & Continuous Assessment Income from study options involving coursework submission or continuous assessment is credited to the financial statements on a straight-line basis over the length of the study period taken. Publications and learning materials Sales of hard and soft copy publications and learning materials are recognised in the month of purchase. E-learning/Licence Fees Sales of e-learning licences are recognised as a sale at the beginning of the licence period. Training courses, events and conferences Income from sales of training courses, events or conferences is recognised in the period when the course, event or conference takes place. Amounts received in advance are carried forward as deferred income.

Other Income Dividends and interest receivable Dividends and interest receivable are included in the financial statements of the period in which they are receivable. Interest is receivable from investments and short-term, fixed rate deposits.

d) Expenditure Recognition Expenditure is recognised on an accruals basis and has been classified under headings that aggregate all costs related to the category.

e) Tangible fixed assets Tangible fixed assets are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Purchases of fixed assets are capitalised and depreciated over their estimated useful lives as follows: Computer equipment 3-5 years Equipment 5 years Fixtures and fittings 10 years Furniture 8 years

f) Intangible fixed assets Intangible fixed assets are stated at historical cost less accumulated amortisation and any accumulated impairment. Intangible fixed assets are capitalised and amortised over their estimated useful lives as follows: Computer software

3-8 years

Impairment of fixed assets At each balance sheet date, the carrying amounts of fixed assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated and the carrying amount of the asset reduced to the recoverable amount. Impairment losses are recognised in the income and expenditure account.

g) Investments All investments are stated at fair value which is determined with reference to quoted market prices at the end of the reporting period. Gains and losses on remeasurement or disposal are recognised in surplus or deficit for the period.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

35

Notes to the Separate and Consolidated Financial Statements continued h) Investment in subsidiaries Investments in subsidiary entities are held at cost less impairment.

i) Cash at bank and short-term deposits Cash at bank and short-term deposits comprise cash in hand, balances with banks and deposits with a maturity not exceeding 95 days from when notice is given. These balances are considered to have an insignificant risk to a change in its value. It also includes cash which is held by the Group’s investment managers for investing as the Group is able to access this cash for other purposes at short notice and without penalty.

j) Current trade debtors and trade creditors Trade debtor and trade creditor balances included within current assets and current liabilities respectively comprise items recognised at their transaction price and measured at the balance sheet date at the undiscounted amount of cash or other consideration expected to be received or paid.

k) Foreign currencies Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in ‘pounds sterling’, which is the company’s functional and the Group’s presentation currency. On consolidation, the results of overseas operations are translated into pounds sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income.

l) Tax Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the entity’s taxable operating surplus and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements. Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse; based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.

m) Operating leases Operating lease rentals are charged to the statement of comprehensive income on a straight-line basis over the period of the lease.

n) Employee benefits The Group provides a range of benefits to employees, including quarterly and annual bonus arrangements, paid holiday arrangements and defined benefit and defined contribution pension plans. (i) Short term benefits Short-term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received. (ii) Quarterly and Annual bonus plans The Group operates quarterly and annual bonus plans for employees. An expense is recognised in the statement of comprehensive income when the Group has a legal or constructive obligation to make payments under the plans as a result of past events and a reliable estimate of the obligation can be made.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

36

Notes to the Separate and Consolidated Financial Statements continued o) Retirement benefits The CII operates two types of pension schemes; a defined contribution plan and a defined benefit plan, both of which require contributions to be made to separately administered funds. Defined contribution scheme For the defined contribution scheme the amount charged to the statement of comprehensive income in respect of pension costs and other post-retirement benefits is the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the statement of financial position. Defined benefit plan The Chartered Insurance Institute Pension Scheme (1993), a defined benefit scheme for staff was closed to new members in 2001 and to further service accrual in 2006. Contributions are made to the scheme at rates set by the scheme actuary and as advised by the scheme administrator. Interest costs, return on assets and actuarial gains or losses are recognised as part of non-operating activities. For defined benefit schemes the amounts charged in operating expenditure are the current service costs and gains and losses on settlements and curtailments. They are included as part of staff costs. Past service costs are recognised immediately in the income and expenditure account if the benefits have vested. If the benefits have not vested immediately, the costs are recognised over the period until vesting occurs. The interest cost and the expected return on assets are shown as a net amount of other finance costs or credits adjacent to interest. Actuarial gains and losses are recognised immediately in the statement of comprehensive account. Defined benefit schemes are funded with the assets of the scheme. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on a high quality corporate bond of equivalent currency and term to the scheme liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The resulting defined benefit asset or liability, net of the related deferred tax asset or liability, is presented separately after other net assets on the face of the balance sheet.

p) Stocks Stocks are valued on a ‘first in first out’ basis at the lower of cost and net realisable value.

q) Fund accounting General funds are funds which are available for use at the discretion of Council for the activities of the Institute. Charitable funds comprise unrestricted funds, available for the use of The Education and Training Trust of the Chartered Insurance Institute in furtherance of its charitable objectives, and restricted funds, available for the use of The Chartered Insurance Institute Prize and Educational Funds in furtherance of its charitable objectives.

r) Critical accounting estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and assumptions which have the most significant risk of causing material adjustment to the carrying amount of assets and liabilities are: 1) Retirement benefits The CII accounts for retirement benefits in accordance with Financial Reporting Standard 102 Section 28.9 to 28.28, “Post-employment benefits”. In determining the pension cost and obligation of the defined benefit pension scheme a number of assumptions are used including: discount rate, inflation, salary increases, mortality rates and expected returns on investments. Further details are provided in note 15 to the financial statements. 2) Provisions for liabilities and charges In accordance with Financial Reporting Standard 102 section 21, “Provisions and Contingencies”, provision is made where the CII believes that, at the balance sheet date, it has an obligation that may require settlement at a future date. The CII is required to estimate the likely future settlement amount based on management’s best view of the most likely outcome. Further details are provided in note 13 to the financial statements.


37

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 2. Operating income 2019

2018

ÂŁ000

ÂŁ000

Membership subscriptions

17,161

16,352

Conferences and event income

2,246

2,239

61

56

19,468

18,647

14,363

13,404

14,363

13,404

Publications

4,950

4,998

Other learning materials

4,956

4,612

a) Membership services and subscriptions

Other services

b) Qualifications Examinations income

c) Educational activities

Training courses

637

654

Other educational activities

789

848

11,332

11,112

22

14

45,185

43,177

Other income Total operating income


38

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 3. Operating result The operating result is stated after charging. 2019

2018

£000

£000

Audit of the Group Financial Statements

84

81

Audit of the Group subsidiaries due to Associates of BDO LLP

25

26

167

45

276

152

a) Auditor’s remuneration Audit fees:

Taxation and other fees

b)

Salaries and related costs 11,960

10,929

Employer’s social security costs

1,207

1,110

Employer’s pension costs

1,054

1,098

14,221

13,137

Total employees

241

230

Full-time equivalents

236

226

531

1,183

1,205

1,035

150

87

Wages and salaries

c) Average number of staff employed during the year

d) Depreciation and Amortisation Depreciation and amortisation of fixed assets

e) Amounts payable under operating leases Building Equipment Cars

6

6

1,361

1,128


39

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 4. Taxation The CII bears tax on its rental, investment and non-mutual income 2019

2018

ÂŁ000

ÂŁ000

187

129

5

(14)

192

115

Taxation charge on ordinary activities Corporation Tax at 19% (2018: 19%) Adjustment in respect of previous periods Tax charge for period

The tax assessed for the year is lower than the standard rate of corporation tax in the UK at 19% (2018: 19%).. The differences are explained below: 2,841

1,108

540

210

(12)

186

Tax relief for items not taken to the statement of comprehensive income

(331)

(162)

Mutual trading activities

(160)

(348)

-

(7)

Charitable exemptions

(2)

30

Deferred tax not recognised

126

521

22

13

5

(14)

Surplus on ordinary activities before tax

Surplus on ordinary activities multiplied by standard rate of corporation tax . in the UK of 19% (2018: 19%)

Effects of: Permanent differences

Unrelieved tax losses

Double tax relief Adjustment in respect of previous periods Effect of other tax rates/credits Tax charge for period

4

58

192

115


40

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 5. Tangible fixed assets Fixtures and Fittings

Computer equipment

Total CII only

Subsidiary furniture and equipment

Total CII Group

£000

£000

£000

£000

£000

01 January 19

883

1,380

2,263

7

2,270

Additions

228

56

284

-

284

Disposals

(15)

(108)

(123)

-

(123)

1,096

1,328

2,424

7

2,431

Cost or Valuation

31 December 19

Depreciation 01 January 19

178

758

936

1

937

Charge for year

155

243

398

-

398

Disposals

(15)

(86)

(101)

-

(101)

31 December 19

318

915

1,233

1

1,234

31 December 19

778

413

1,191

6

1,197

31 December 18

705

622

1,327

6

1,333

Net book value


41

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 6. Intangible fixed assets Computer software

Total CII and Group

ÂŁ000

ÂŁ000

4,439

4,439

Cost or Valuation 01 January 19 Additions

4,246

4,246

31 December 19

8,685

8,685

3,812

3,812

133

133

3,945

3,945

31 December 19

4,740

4,740

31 December 18

627

627

Amortisation 01 January 19 Charge for year 31 December 19

Net book value

Additions to intangible assets in 2019 relates almost entirely to the development of our e-commerce platform and a new remote invigilation application. The development of the e-commerce platform is part of our wider Transformation programme.


42

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 7. Investments Group

Fixed interest

Equities & Unit Trusts

Total

£000

£000

£000

5

92

97

Additions

786

4,197

4,983

Disposals

-

(86)

(86)

Gains on disposal

-

8

8

Investments at fair value at 1 January 2019

Revaluation to fair value

(17)

171

154

Investments at fair value at 31 December 2019

774

4,382

5,156

On an historical cost basis, the comparable amounts of investments are:

790

4,165

4,955

Fixed Interest

Equities & Unit Trusts

Total

£000

£000

-

-

-

Institute Only

Investments at fair value at 1 January 2019 Additions

786

4,197

4,983

Disposals

-

(86)

(86)

Gains on disposal

-

8

8

Revaluation to fair value

(17)

151

134

Investments at fair value at 31 December 2019

769

4,270

5,039

On an historical cost basis, the comparable amounts of investments are:

786

4,119

4,905


43

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 8. Investments in subsidiaries Institute Only

Investments in subsidiaries

Total

ÂŁ000

ÂŁ000

Investments at cost at 1 January 2019

192

192

Investments at cost at 31 December 2019

192

192

Name of company

Principal activity

Country of incorporation

Company/Charity Number

Beneficial holding

C.I.I Enterprises Limited

E-learning and commercial activities

United Kingdom

01953478

Ordinary shares

The Education and Training Trust of the Chartered Insurance Institute

Education and training

United Kingdom

02812416 (Company) 1021017 (Charity)

Incorporated . charity

The Chartered Insurance Institute Prize and Educational Funds

Award prizes

United Kingdom

216054

Charitable trust

The Personal Finance Society

Professional body for financial advisors and related roles

United Kingdom

05084125

Limited by guarantee

Chartered Institute of Insurance and Financial Services Private Limited

Sales and promotion of the Chartered Insurance Institute products

India

U80301MH2009FTC 191233

Ordinary shares

Vertical Rainbow Sdn. Bhd

Sales and promotion of the Chartered Insurance Institute products

Malaysia

941645-T

Ordinary shares

The Chartered Insurance Institute Hong Sales and promotion of the Chartered Kong Limited Insurance Institute products

Hong Kong

1396471

Ordinary shares

Chartered Insurance Ins DMCC

Dubai

DMCC140630

Ordinary shares

Sales and promotion of the Chartered Insurance Institute products

The Society of Financial Advisers and The Society of Technicians in Insurance were both considered dormant throughout 2019. All of the above subsidiaries are 100% controlled by CII.


44

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 9. Debtors Group

Amounts owed by subsidiary undertakings Trade debtors Corporation tax Prepayments Other debtors Accrued income 31 December

Institute

2019

2018

2019

2018

£000

£000

£000

£000

-

-

1,978

2,563

4,060

3,965

4,063

3,934

-

27

27

27

1,303

1,066

1,150

829

709

782

695

729

363

466

138

27

6,435

6,306

8,051

8,109

10. Movement in cash and short-term deposits Group

Institute

2019

2018

2019

2018

Cash

£000

£000

£000

£000

1 January

9,885

4,169

8,979

3,337

Increase/(Decrease) in cash

1,237

5,716

(2,558)

5,642

31 December

11,122

9,885

6,421

8,979

Cash balances include £270,219 (2018: £273,909) of cash held by The Chartered Insurance Institute Prize and Educational Funds, . the use of which is restricted. Group 2019 £000

1 January

34,902

Withdrawals

Short-term deposits

New deposits placed 31 December

Institute 2018

2019

2018

£000

£000

£000

21,233

34,902

21,233

(8,589)

-

(8,589)

-

228

13,669

228

13,669

26,541

34,902

26,541

34,902

Group

Institute

2019

2018

2019

2018

Total cash at bank and short term deposits

£000

£000

£000

£000

Cash

11,122

9,885

6,421

8,979

Short-term deposits

26,541

34,902

26,541

34,902

Total cash at bank and short term deposits

37,663

44,787

32,962

43,881

The cash balance includes an amount of £4.0m deposited in an Escrow account, held by Stephenson Harwood LLP as the escrow agents. The amount is restricted for the purposes of the CII Pension Scheme 1993 and will be transferred in 2020 to the scheme, according to terms specified in the Escrow agreement.


45

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 11. Creditors Group

Trade creditors Corporation tax Amounts owed to subsidiary undertakings Other creditors

Institute

2019

2018

2019

2018

£000

£000

£000

£000

1,947

1,355

1,981

1,355

139

138

-

-

-

-

14,531

16,932

464

622

437

601

Accruals

2,875

2,702

2,491

2,313

Deferred income (note 12)

9,873

10,132

7,511

7,888

15,298

14,949

26,951

29,089

31 December

The amounts owed to subsidiary undertakings represents intergroup loans totalling £5,500,000 which is repayable on demand and amounts received on behalf of subsidiary undertakings in the ordinary course of business.

12. Deferred income Group

Institute

2019

2018

2019

2018

£000

£000

£000

£000

Member subscriptions

6,042

6,258

3,803

4,081

Examination fees

2,226

2,399

2,226

2,399

Other

1,605

1,475

1,482

1,408

31 December

9,873

10,132

7,511

7,888

The following table represents the movement of deferred income during the year: Group

Deferred income at start of year Amounts invoiced during year Amounts taken into income for the year Deferred income at end of year

Institute

2019

2018

2019

2018

£000

£000

£000

£000

10,132

9,004

7,888

6,804

24,995

25,194

20,698

21,141

(25,254)

(24,066)

(21,075)

(20,057)

9,873

10,132

7,511

7,888


46

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 13. Provision for liabilities Group and Institute

At 1 January 2019 Reclassification Provided during the year Utilised during the year At 31 December 2019

Legal and Compliance

Property

LTIP

Total

£000

£000

£000

£000

-

462

212

674

9

(9)

-

-

29

11

176

216

-

-

(110)

(110)

38

464

278

780

Provision for legal and compliance costs related to amounts set aside to cover legal and other related costs that the CII may be liable for in connection with operations both in the UK and Internationally. Provision for property costs represents the dilapidation costs on the CII’s leased property, including the new office building leased in 2018. Costs are based on best estimates of restoration costs for the property. The provision for the Long-Term Incentive Plan (LTIP) bonus award is payable to three members of the executive team for their achievements over a five-year period, the first vesting period was awarded in 2019, on approval by the Nominations and Remuneration Committee.


47

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 14. Accumulated funds Group and Institute General Funds Group

Charitable Funds

2019

2018

Revenue

Unrestricted

Restricted

Total

Total

£000

£000

£000

£000

£000

33,427

3,837

359

37,623

39,770

Net Surplus/(deficit) for the year after taxation

2,637

(5)

17

2,649

993

Employer contribution to the defined benefit pension scheme

(996)

-

-

(996)

(3,096)

(55)

-

-

(55)

(44)

35,013

3,832

376

39,221

37,623

At 1 January

Foreign exchange loss At 31 December

General funds include those of the CII, CII Enterprises Limited and The Personal Finance Society, Chartered Insurance Institute Hong Kong Limited, Chartered Institute of Insurance and Financial Services Pvt Limited and Chartered Insurance Ins DMCC. Unrestricted charitable funds are those of The Education and Training Trust of the Chartered Insurance Institute. Restricted charitable funds are those of The Chartered Insurance Institute Prize and Educational Funds.

General Funds Institute Only

At 1 January Net Surplus/(deficit) for the year after taxation Employer contribution to defined benefit pension scheme At 31 December

2019

2018

Revenue

Total

Total

£000

£000

£000

24,373

24,373

28,027

1,175

1,175

(558)

(996)

(996)

(3,096)

24,552

24,552

24,373


48

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 15. Pension fund The Institute operated a defined benefit pension scheme which was closed on 30 June 2001. This is a multi-employer defined benefit scheme. The CII is the majority employer of the scheme with the Insurance Institute of London, the Institute of Manchester and The Insurance Charities being the other participating members of the scheme. The scheme is funded in advance by contributions at rates assessed by the scheme actuary in regular funding reviews. The scheme assets are held separately from the CII in trustee-administered funds. Following the actuarial valuation at 30 June 2005, the CII agreed with the Trustees to cease accruing for future service with effect from 30 June 2006 and transfer all active members into the CII’s stakeholder defined contribution scheme. The CII makes contributions into the stakeholder scheme at rates between 10% and 20% of basic salary. In addition, a capital contribution of £3.0m was paid into the defined benefit scheme on 19 December 2005. Following the actuarial valuation at 30 June 2008 the CII agreed with the Trustees to transfer the full outstanding balance in the Escrow account into the scheme and to fund the remaining deficit by equal payments over four years, starting in July 2010. A further £0.5m of contribution was paid in December 2014. Following the actuarial valuation at 30 June 2014, the CII agreed to make annual contributions of £0.1m into the scheme until June 2023. The actuarial valuation at 30 June 2017 showed a shortfall of £3.0m, a funding level of 93%. To correct the shortfall, the CII and the Trustees agreed to pay a further contribution of £1.0m into the scheme which was settled at the end of November 2019. The CII has also set aside a further £4.0m, deposited into an Escrow account, managed by Stephenson Harwood LLP, for future contributions to the pension scheme. The pension costs charged in these financial statements have been assessed in accordance with the advice of a qualified actuary based on an actuarial valuation at 30 June 2017 using the attained age method. The principal valuation assumptions were an investment return preretirement of 2.07% per annum and investment return post retirement of 2.07%. The market value of the scheme assets at the valuation date was £39.7m and this represented 93% of the actuarial value of the benefits that had accrued to members. The actuarial valuation described above has been updated at 31 December 2019 by a qualified actuary using revised assumptions that are consistent with the requirements of FRS 102. Investments have been valued for this purpose at fair value. The major assumptions used for the FRS 102 actuarial valuation were: Discount rate Inflation assumption (RPI) Rate of increase in salaries Rate of increase of pensions in payment Rate of increase of pensions in deferment

2019 2.05% 2.90% N/A 2.80% 2.90%

2018 2.90% 3.15% N/A 3.00% 3.15%

2019

2018

£000

£000

31,942

35,757

910

919

-

204

Change in benefit obligation Benefit obligation at beginning of year Interest cost Amendments

5,124

(1,102)

-

(2,967)

Benefits paid

(1,146)

(869)

Benefit obligation at end of year

36,830

31,942

Actuarial (gains) - effects of changes in assumptions Actuarial (gains) - effect of experience adjustments

Analysis of defined benefit obligation Plans that are wholly or partly funded

36,830

31,942

Total

36,830

31,942


49

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 15. Pension fund continued 2019

2018

£000

£000

40,450

39,670

1,153

1,033

3,703

(2,480)

Change in plan assets Fair value of plan assets at beginning of year Expected return on plan assets Actuarial gains/(losses)

996

3,096

Benefits paid

(1,146)

(869)

Fair value of plan assets at end of year

45,156

40,450

8,326

8,508

(8,326)

(8,508)

-

-

2019

2018

£000

£000

910

919

(1,153)

(1,033)

243

114

-

-

1,421

(1,380)

(425)

4,476

Total pension cost recognised in other comprehensive income

996

3,096

Cumulative amount of actuarial gains immediately recognised

5,109

6,530

Employer contributions

Funded status Effect of surplus cap Net amount recognised

Components of pension cost Interest cost Expected return on plan assets Interest expense on effect of asset ceiling Total pension cost recognised in the income and expenditure account Actuarial loss/(gains) immediately recognised Effect of surplus cap

In 2018, £5m was paid into an escrow account to support the pension scheme. In the last quarter of 2019, £1m was paid from the escrow account to the pension scheme. A contingent liability in relation to the pension scheme is disclosed in Note 18.


50

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 15. Pension fund continued 2019

2018

£000

£000

1,359

4,542

-

9,324

43,797

21,314

-

5,270

45,156

40,450

Plan Assets Cash & cash equivalents Equity instruments Debt instruments Alternative strategy funds Total

Financial year ended 31 December 2019

2018

2017

2016

2015

£000

£000

£000

£000

£000

(36,830)

(31,942)

(35,757)

(36,895)

(28,660)

45,156

40,450

39,670

37,657

31,728

8,326

8,508

3,913

762

3,068

(3,704)

2,480

(1,935)

(5,623)

465

8%

6%

(5%)

(15%)

2%

Five year history Benefit obligation at end of year Fair value of plan assets at end of year Surplus

Difference between expected and actual return on scheme assets: Amount Percentage of scheme assets Experience gains and (losses) on scheme liabilities: Amount Percentage of scheme liabilities

-

-

-

-

-

0%

0%

0%

0%

0%


51

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 16. Related party transactions The CII has taken advantage of the exemption under Financial Reporting Standard 102 section 33, Related Party Disclosures, not to disclose transactions between Group entities that have been eliminated on consolidation in these financial statements. There are no other related party transactions.

Key management personnel Key management personnel are defined as the Board and the direct reports of the CEO who have authority and responsibility for planning, directing and controlling the activities of the Group. Total remuneration in respect of these individuals is £2,074,388 (2018: £1,839,088). 2019

2018

£000

£000

Key management compensation 1,729

1,499

Employer’s social security costs

202

190

Employer’s pension costs

143

150

2,074

1,839

Wages and salaries

Included above are honorarium payments to four lay members (i.e. non-members of the CII) and two other board members totalling £87,700 (2018: £41,800) for attendance at both board and committee meetings. The Institute provides the following benefits to all the members of the Executive Team: • Private Healthcare (single cover) • Critical Illness cover • Life Insurance • Dependants’ pension scheme (only those who joined the CII prior to 01/01/2014) A further eight committee members received honorarium payments for attendance at committee meetings, these payments are . not included above. Honorarium payments are paid in accordance with the following scale, which includes preparation for the meetings attended and . any outputs required as a result: Board members Committee chairs Committee members

up to £8,000 per annum up to £22,000 per annum up to £2,000 per meeting

Honorarium payments are agreed and reviewed by the Nomination and Remuneration Committee and reflect each member’s role and their responsibilities and requirements. The annual base salaries (excluding allowances, benefits and bonuses) of the CEO and the direct reports of the CEO at 31 December 2019 are shown below on a banded basis. 2019 2018 £220,000 - £249,999 1 1 £190,000 - £219,999 1 1 £160,000 - £189,999 3 3 £100,000 - £129,999 2 4 <£100,000 1 -


52

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 16. Related party transactions continued For 2019, the Executive Directors included in the table above are: £220,000 - £249,999 £190,000 - £219,999 £160,000 - £189,999 £100,000 - £129,999 <£100,000

2019 S Fisher K Richards J Bissell, S Jenkins, D Thompson M Collett, I Simons R Paterson

17. Operating Leases At 31 December the Group and the CII had total commitments under non-cancellable operating leases of: 2019

2018

£000

£000

Buildings Less than 1 year 2 - 5 years Over 5 years

1,158

1,169

4,592

4,567

1,431

2,571

7,181

8,307

Equipment Less than 1 year

55

60

2 - 5 years

35

107

90

48

1

6

Cars Less than 1 year 2 - 5 years

-

1

1

7

18. Contingent liability As at the date of the financial statements, the Directors were aware of a review into the CII Pension Scheme 1993 which may give rise to an additional liability to the scheme. As at the date of these financial statements, the review remained ongoing and as such the Directors were unable to quantify any potential increase in the liability but believe, based on available information, that the CII has sufficient reserves to address any potential liability which may arise from the review.


The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Notes to the Separate and Consolidated Financial Statements continued 19. Post balance sheet event In March 2020, the UK government implemented significant measures to contain the spread of the Covid-19 virus, which had been declared as a pandemic by the World Health Organisation (WHO) during the same month. The measures implemented in the UK are similar to those implemented in many other countries around the world, and have significantly impacted many businesses, both operationally and financially. For the CII Group (including its International operations) the key impacts which may arise or have arisen include: • The cancellation of examinations and events hosted by the CII Group, in the interest of the health and safety of our stakeholder and in compliance with government guidelines to limit the risk of transmission of the virus; • The reduction to revenue which may arise from any financial difficulty which may be experienced by CII members or examination candidates or the companies which the CII serves; • The operational impact to the CII arising from the risk of staff illness; • The impact to the CII’s investment portfolio due to the global disruption to capital markets. As there remains uncertainty around the period over which governments’ measures worldwide will remain in place, the precise impact cannot be determined. However, the CII has modelled the impact of these measures to assume that certain products may not deliver revenue for the remainder of the financial year. This work concluded that, with the implementation of risk mitigation measures which are available to the Group, the CII and its subsidiaries will have sufficient liquid resources (cash and investments which can be converted to cash) to continue to operate for at least twelve months from the date of approval of these financial statements. Risk mitigation measures include: • Associated cost savings from the postponement / cancellation of examinations or events; • Deferral of projects which were planned to be executed in 2020; • Modifying our operations to conform to the current circumstances. There were no circumstances which arose from the Covid-19 virus pandemic that resulted in an adjustment to the CII Group financial statements as at 31 December 2019.

53


54

The Chartered Insurance Institute Governance Report and Consolidated Accounts 2019

Reference and administrative details Company number Incorporated by Royal Charter: RC000104

Principal office 21 Lombard Street London EC3V 9AH

Auditor BDO LLP 2 City Place Beehive Ring Road Gatwick West Sussex RH6 0PA

Principal bankers HSBC 62-76 Park Street London SE1 9DZ

Investment Manager Quilter Cheviot Investment Management 1 Kingsway London WC2B 6AN

Legal advisers Cannings Connolly 16 St. Martinâ&#x20AC;&#x2122;s Le-Grande London EC1A 4EE

Company Secretary Caroline Lace (until 3 July 2019) Marianne Wyles (appointed 4 July 2019, until 31 December 2019) Victoria Finney (appointed 1 January 2020)

Executive Management Team Chief Executive Chief Operating Officer Managing Director of Engagement/. Chief Executive, Personal Finance Society Professional Standards Director Development Director Marketing Director International Director Learning & Assessment Director

Sian Fisher John Bissell Keith Richards Melissa Collett Steve Jenkins Ian Simons David Thompson Gill White (appointed 2 January 2020)


Separate and Consolidated Financial Statements 2019 Incorporating a strategic and financial review for the year ended 31 December 2019

Profile for Redactive Media Group

CII Financial Statement 2019  

CII Financial Statement 2019  

Profile for redactive