The Natural Disaster Insurance of Iceland (NTÍ) operates in accordance with the Special Act on Icelandic Natural Disasters Insurance, No. 55/1992, and Regulation No. 700/2019 on Icelandic Natural Disasters Insurance, as amended. The site of NTÍ is located in Hlíðasmára 14, Kópavogur.

NTÍ operates in the field of non-life insurance according to Act No. 55/1992 and the Act on Insurance Activities no. 100/2016. In accordance with the Act on Auditors, No. 79/2008, insurance companies are defined as public interest entities, and the role of audit committees in such entities is specifically provided for in the Annual Accounts Act, No. 3/2006.

According to the annual financial statements issued, the premiums were ISK 3,706,02,000 at the end of the year. The rules of procedure of the board are available on the NTÍ website. In preparing this statement of government, the latest versions of the guidelines of the Icelandic Trade Council, Nasdaq Iceland Ltd. and the Icelandic Confederation of Labour, which entered into force on 1 July 2021, were used.

Natural disaster insurance is a statutory insurance that directly compensates for damage to insured property caused by volcanic eruptions, earthquakes, landslides, avalanches and water avalanches. The natural disaster insurance is accompanied by fire insurance for buildings, which is a compulsory insurance. Where movable property is covered against fire, whether by a special movable property insurance or a composite movable property insurance, which includes compensation arising from fire and is classified as asset insurance, then natural disaster insurance shall be accompanied by such insurance. The insurance amount of a natural disaster insurance is the same as the relevant fire insurance, but the insurance conditions are different.

Natural disaster insurance is also required for structures, such as bridges, harbours, ski lifts and various publicly owned utility structures, even though they are not fire-insured. When structures are covered by the NTÍ natural disaster insurance, this refers to direct non-life insurance business. Insurance may be provided for the construction work elsewhere than at NTÍ.

Disputes as to whether damages related to compensation have occurred or as to the amount of insurance compensation may be referred to a specially appointed resolution committee. The chair of the ruling committee is Helgi Birgisson, a lawyer at Forum Lawyers, nominated by the Supreme Court of Iceland. The other committee members are Sólveig Þorvaldsdóttir, a civil engineer, nominated by the University of Iceland, Guðrún Ólafsdóttir, a seismic engineer, appointed by the Minister, and Stefán Már Stefánsson, professor emeritus, appointed by the Minister. The term of office of the Committee shall be three years from 1 March 2022 to 1 March 2025.

NTÍ has no judgments for criminal offences under the General Penal Code, the Competition Act, the Act on Insurance Companies or the Accounting, Annual Accounting, Bankruptcy or Public Provisions Act or the special legislation applicable to entities subject to public supervision of insurance activities.

NTÍ is subject to oversight by the Central Bank of Iceland and has established a coordinated risk management system that covers all operational aspects of NTÍ. Until 2017, the FME Guiding Recommendation No. 3/2014 on Risk Management and the scope of work of an actuary at insurance companies on which the risk management of NTÍ was based was in force, but it has now been repealed. As the FME will not maintain the recommendation, it was decided to consider COSO ERM 2017 in the review of harmonised risk management from 2017. The current risk strategy is therefore based on the latest guidelines from COSO, which stands for Commitee of Sponsoring Organizations of the Treadway Commission.

The management and organisation of NTÍ is documented in its quality system. The guidelines for the organization's employees aim for everyone to be responsible for the quality of their work, NTÍ's services and information security. Internal control is built into NTÍ's procedures, and internal audits and risk analyzes are carried out regularly. An employee of the service department presents the results of quality and safety issues, internal audits and the status of improvement projects annually following internal audits and other audits to the board and audit committee.

NTÍ emphasizes a clear division of labor and responsibility. The monthly reporting on the asset management portfolio is an important part of providing information to the board of NTÍ. In addition, there is a detailed report on the portfolio every third year, and an annual own risk and solvency assessment is carried out together with an annual report on the performance of the portfolio. The CEO usually meets several times a year with the fund managers, about how the management and supervision of investments is done and to assess whether it is adequate.

The annual report on risk management and other regular reviews aim to ensure transparency in the activities and make it easier for NTÍ to discover and correct possible errors, monitor deviations and fluctuations in the activities and give scope to react if risk factors or changes in the operating environment warrant it. NTÍ's claims liability and reinsurance coverage are assessed regularly and care is taken to ensure that they are in line with the needs of the organization and its obligations.

An external audit contract was concluded with Deloitte in autumn 2023 for five years for the period 2023-2027 based on a tender through the National Audit Office. An internal audit contract was in force with EY (Ernst and Young) for the years 2022-2024, but due to the merger of EY and Deloitte at the end of 2023, it is clear that an internal audit contract must be concluded with another party.

The board and staff have jointly established a code of conduct for NTÍ, which is intended to be a kind of guide for those who work in the interests of NTÍ. The code of ethics is a guiding light for the board and employees regarding the ethical responsibility that all parties involved have agreed to follow in word and deed. The rules are based on values ​​that must be dominant in all NTÍ decisions, they are fairness, reliability, cooperation and initiative. The Code of Conduct was last revised in October 2023.

Human resources strategy was approved in March 2022, but it is based on five main elements, workplace culture, management and development, working relationship, career development and health and well-being.

The board has presented a vision for the future in individual issue categories in policy documents that are part of NTÍ's quality system. Goals and methods have been set with all the policies of the board to ensure their implementation and compliance with them.

The operating rules of the board are usually revised annually and were last confirmed in November 2023. The rules stipulate, among other things, the qualifications of the board members, division of labor and their duties. The rules also cover the roles and responsibilities of the board of directors and CEO, representation of the board of the organization, provision of information to the board, rules of the meeting, meeting minutes and decision-making authority of the board. In addition to the policy-making role, the board supervises that NTÍ's activities are in accordance with laws and regulations and supervises the accounting and disposal of the organization's funds. The board supervises the effectiveness of risk management, the success and efficiency of internal work and contributes to the achievement of NTÍ's goals.

The risk management policy is under constant review and the three biggest risk factors in the business are defined as; claims handling, portfolio management and actuarial risks. The risk management strategy is in the spirit of coordinated risk management COSO 2017, where i.a. risk culture, strategic planning, risk during project implementation, risk information and reporting are discussed together with requirements for internal control and risk measurement.

The information security policy was last revised in February 2022 and is based on FME guideline no. 1/2019 due to risks in the operation of information systems of regulated entities.

The board confirmed NTÍ's revised environmental and climate policy in October 2022, which includes, among other things, intended to ensure compliance with "Green steps in government operations" and support the government's focus on reducing greenhouse gas emissions. NTÍ's special policy on social responsibility is not in force, but in the organization and framework of the activities there are rules in force that are intended to ensure operational continuity and social safety in the event of a natural disaster. Does this appear i.a. in the rules on investment activities, investment strategy and contingency plan.

The board has not established a policy on diversity in relation to the board. The board assumes that those appointed to the board comply with the applicable laws at all times.

The board holds joint meetings with internal and external auditors and the audit committee on internal control and risk management. Both the board and the audit committee meet at least once a year without the presence of the director of NTÍ. The board's assessment of its own work was last carried out in October 2023, and the board considered that it had fulfilled its obligations according to the law and the rules of procedure and that its work had produced the desired results. In the performance evaluation of the board, emphasis was placed on the evaluation of the organization and execution of board meetings, the provision of information to the board, the roles, responsibilities and limits of authority of the board and the CEO, the effectiveness of the board members and the evaluation of the work of the chairman of the board and the CEO. EY assisted the board in carrying out the performance evaluation.

Annually, the audit committee submits a report to the board on its work and assesses its own work in accordance with good practices of audit committees.

Stjórn hefur sett sér persónuverndarstefnu sem birt er á heimasíðu NTÍ. Persónuvernd er hluti af áhættumati við alla samningagerð á vegum NTÍ og eru vinnslusamningar gerðir alls staðar þar sem unnið er með persónuupplýsingar. Mikil áhersla er lögð á öryggi persónuupplýsinga í upplýsingakerfum. PwC sinnir hlutverki persónuverndarfulltrúa fyrir hönd NTÍ.

A major focus is on the diversification of assets in the investment strategy of NTÍ. Agreements are in place with Arion Bank, the Icelandic Fund, Icelandic securities and Landsbankinn on asset management. Assets are owned in both domestic and foreign assets and the main focus is on low-risk investments where security is the guiding principle above return on assets. Analytica supervises asset managers and compiles monthly statements on the portfolio's position and compliance with investment policy. The board shall receive a monthly summary of the portfolio's promotional status. The third-quarterly report is a detailed analysis report and a comparison of the performance of asset managers, which is presented to the board for discussion.

Reinsurance contracts are concluded for the purpose of reducing the exposure of the institution. The Institute has purchased foreign reinsurance for 2024 based on two contracts. One of the contracts has two functionalities. On the one hand, for a single event, up to 25 billion krónur, with its own risk of 10 billion krónur. There is also a cumulative provision in the agreement, where several events of different types can count to ISK 10 billion, with a maximum of ISK 25 billion. The other contract provides protection against very large single events, where reinsurers pay up to ISK 15 billion in excess of the ISK 25 billion in case of a single event covered by the first contract. Generally, around 25 reinsurers are on NTÍ contracts for reinsurance coverage because of risks in major events. Since 2014 Aon Benfield has been responsible for reinsurance brokerage. Reinsurance contracts shall be renewed at the end of each year for the following calendar year.

The board of NTÍ is made up of five people and the term of office is from 1 July 2023 to 30 June 2027. Three are elected by Alþingi. Insurance companies that collect premiums (SFF) elect one board member, while the Minister of Finance and Economy appoints a chairman. Board members are appointed for a four-year term. The board consists of: Sigurður Kári Kristjánsson, chairman, Jóna Björk Guðnadóttir vice chairman, Hallfríður G. Hólmgrímsdóttir, Ragnar Þorgeirsson and Steinar Hardarson.

Deputies on the board are Elísabet Júlíusdóttir, Gunnar Már Gunnarsson, Margrét Arnheiður Jónsdóttir, Sigríður Gísladóttir and Silja Dögg Gunnarsdóttir.

The Board of Natural Disaster Insurance Íslands believes that the provisions of guidelines on governance no. 2.3.2 regarding the independence of directors is satisfied. The board members are all independent of the organization and its day-to-day management.

It is customary to invite all deputies to attend one board meeting a year as observers, but this is usually done at a board meeting held on the morning of the annual meeting in May each year. The purpose of inviting deputies to the annual meeting is to promote the maintenance of knowledge about the activities and to ensure that they are familiar with the working practices that are followed in connection with board meetings. The Board of Directors of Natural Disaster Insurance of Iceland met 12 times in 2023 and a deputy was called to a meeting in eight cases due to the absence of the main members. Two board members were absent from three meetings and two were absent from one meeting. The chairman of the board attended all meetings of the board during the year.

During the year, finance and asset management focused on 29% of the board's working time, claims handling 18%, strategic planning and quality issues 17%, actuarial risks and reinsurance 15%, and risk management and control aspects of the business 11%. Other aspects of the board's duties amounted to 8% of the board's tenure.

The audit committee works according to the rules of procedure on the basis of IX. chapter A. in the Act on Annual Accounts no. 3/2006. In Article 108 stipulates the obligation of units related to public interests to operate an audit committee. NTÍ's audit committee is made up of three committee members elected by NTÍ's board.

The role of the committee is to monitor the work process for the preparation of financial statements, risk management and the effectiveness of internal control. It shall ensure the quality of the organization's annual accounts and other financial information and the independence of its auditors.

The audit committee consists of Sigurður Þórðarson, chairman, Steinunn Guðjónsdóttir and Ragnar Þorgeirsson, who is also a board member. Deputies are not appointed to the audit committee, so meetings are generally not held unless all committee members can attend the meeting.

The committee met eight times in 2023.

• Guidelines from the Icelandic Trade Council, Nasdaq Iceland Ltd. and the Icelandic Confederation of Labour take into account the Act on Public Limited Companies and therefore they do not apply to the operations of NTÍ. Nevertheless, they are taken into account in the drafting of the governance statement. The instructions recommend stating any deviations from the instructions and this is done in the following list.

  1. SECTION VIII • In view of the fact that NTÍ is not a public limited company and that the board is not elected at the annual general meeting, this Chapter does not apply to the activities of NTÍ.

  2. SECTION VIII • Provision 2.2.1 is not complied with given that the appointment of the Board is in accordance with Act No. 55/1992 and the Board does not have decision-making powers on the composition of the Board of Directors. • The provisions of 2.3.3 to 2.3.5 and certain points of 2.3.6 do not apply to NTÍ, as NTÍ is not a limited company. • The Board of Directors does not make annual assessments of the size and composition of the Board pursuant to provisions 2.6.2, since it is up to the Althing, the Ministry and the SFF to appoint Board members. • Chapter 2.7 on remuneration policy does not apply to NTÍ, as NTÍ is not legally required to have such a policy. • The board of directors has not set a policy on sustainability, diversity and ethics in accordance with Chapter 2.9. • Chapter 2.10 on relations with shareholders does not apply as NTÍ is wholly owned by the Icelandic state.

  3. SECTION VIII • No deviations.

  4. SECTION VIII • No deviations.

  5. SECTION VIII • No board sub-committees are in operation at NTÍ, apart from an audit committee that is statutory and operates according to the provisions that apply to it. • No remuneration committee under clause 5.4 is employed by NTÍ, as NTÍ is not a limited company.

  6. SECTION VIII • Point 7 of clause 6.1.2 does not apply to the activities of NTÍ, as no nominations committee is in operation given that NTÍ is not a limited company. • Chapter 6.1.3 does not apply to NTÍ, as NTÍ is not part of a group. • Points 2, 4, 5, 6, 7 and 8 of clause 6.2.2 do not apply to NTÍ, as NTÍ is not a public limited company.

This statement of management has been prepared by the board of directors and the director of NTÍ to the best of my knowledge. It is intended to provide clear information on the governance of the institution to customers, regulators, the owner and others concerned.