Corporate GovernanceMS&AD's Basic Policy Regarding Internal Control System

The system stipulated in this policy was established to be in alignment with the Corporation Law in addition to holding “securing trust on financial reporting” as its top priority.The summary of the basic policy is as follows.

• (1) From the perspective of maximizing the corporate value of the whole group, the Company shall control business affairs of the whole group and shall exercise its shareholder’s right accordingly to its direct subsidiary (“direct investment subsidiary”).
• (2) The Company shall conclude a management agreement with its direct investment subsidiary. Based on that contract, the Company shall call for the direct investment subsidiary to comply with the Group Basic Policy as well as to seek approval from and report to the Company on any important matters related to direct investment subsidiary. Additionally, in relation to sub-subsidiary, the direct investment subsidiary shall, in principle, manage its own subsidiaries accordingly as agreed in the contract.

• (1) As well as formulating the Group management plan, the Company shall set the task-specific numerical targets and appropriately distributes the managerial resources needed to realize that plan. In addition, the Company and its subsidiary's execution of business operations shall be reported to the Board of Directors.
• (2) To realize rapid decision-making and appropriate monitoring, the Company shall introduce an executive officer system, appoint outside directors and set the number of Directors at 15 or less.
• (3) To ensure assignments of Directors and Executive Officers are carried out appropriately and efficiently, the Company shall establish rules of organizational and administrative authority and clarify the assignments to be implemented and the relevant authority.

• (1) In accordance with the MS&AD Insurance Group Basic Policy on Compliance set out by the Holding Company’s Board of Directors, the Company and its Group companies shall make sure that each and every director and employee is aware of the importance of compliance, ensure compliance with all applicable legislation and internal regulations, etc. and maintain high ethical standards as part of all business activities.
• (2) To promote and complete compliance program in the Company and the Group companies, MS&AD shall maintain organizational structure of Compliance Department and report regularly on overall compliance promotion situations of the Group to the Board of Directors. To monitor compliance promotion, it shall set Risk Compliance Committee and take necessary measures on issues identified by it.
• (3) The Company and the Group companies shall set up an internal report system so that all directors and employees may directly report to in-house contacts or outside lawyers on individual or group behaviors that are unjust, illegal, or unethical.

• (1) In addition to establishing a shared basic understanding in accordance with the MS&AD Basic Policy on Risk Management set out by the Company's Board of Directors, the Company and its Group companies shall formulate company-specific risk management policies and take appropriate risk management measures in line with circumstances at each company.
• (2) The Company's Board of Directors shall establish a risk management department and put in place the necessary organizational framework to identify the full range of risks inherent in the Group's activities and effectively implement integrated risk management. To monitor risks and risk management activities, the Company shall also establish a Risk Compliance Committee and take all necessary measures to avoid and minimize risks, based on the results of consultations held by the Committee (including the results of integrated risk management evaluation (quantitative analysis)).
• (3) The Company shall evaluate risk management and business contingency plans at Group companies and establish a risk management and business contingency plan for the Group as a whole.

• (1) Out of the Corporate Auditors, the Company shall nominate at least one person who is equipped with sufficient knowledge of accounting or finance.
• (2) In accordance with the MS&AD Insurance Group Basic Policy on Disclosure Regulation set out by the Company’s Board of Directors, the Company and its Group companies shall put in place the necessary framework to ensure the timely and adequate disclosure of financial information and other information relating to the Group.
• (3) To secure fair disclosure of information, the Company shall set Information Disclosure Committee to maintain internal control regarding financial reports of the Company and the Group, as well as to examine the effectiveness of disclosure system.

In line with the "MS&AD Insurance Group Basic Policy on Internal Audit", the Company and its direct investment subsidiary shall maintain internal audit systems tailored to all the business activities of MS&AD in order to ensure efficiency and effectiveness of internal audit. The Internal Audit Department shall report all important items from the internal auditing results of the Company and its direct investment subsidiaries,as well as improvement progress in the audited departments, to the Board of Directors.

The Company shall establish regulations for document management to appropriately store and manage information as well as documents that are related to Directors' and Executive Officers'duties. Directors and Corporate Auditors shall be able to browse the information at all times.

• (1) System related to an employee hired to assist the duties of the Corporate Auditors
  To accommodate the duties of Corporate Auditors, the Company shall set a Corporate Auditor Room with an assisting employee. Respecting the independence of the Corporate Auditor Room, organizational change of the Room as well as transfer or discharge of the hired employee shall only take effect upon reaching a consensus at the Board of Auditors. Employee evaluation shall also take place upon consultation with an Auditor assigned by the Board of Auditors.
• (2) Systems of report to the Auditors
  • • Directors and Executive Officers hall report to the Board of Auditors without delay about matters governed by law, decisions that greatly influence business operations and organizations, and the results of internal audits and the internal reporting system.
  • • Employees shall be able to directly report to the Board of Auditors about managerial acts that are seriously fraudulent or illegal, and about facts that may have extremely negative impact on the Company.
• (3) Other systems
  • • Auditors shall attend important meetings including the Group Management Committee Meetings.
  • • Chairman of the Board, President, and Representative Director shall convene regular consultations with the Board of Auditors. Additionally, Internal Audit Department is to cooperate with the audit upon request from the Auditors.