Basic Policies for Internal Controls

In accordance with the Companies Act of Japan and its Ordinance for Enforcement, the Business Management Agreement entered into with Tokio Marine Holdings, Inc. (hereinafter "Tokio Marine HD"), and Tokio Marine Group's basic policies established by Tokio Marine HD, Tokio Marine & Nichido Fire Insurance Co., Ltd. ("the Company") sets forth the "Basic Policies for Internal Controls" as follows.

• (1)
  Based upon the "Tokio Marine Group Corporate Philosophy", the Business Management Agreement entered into with Tokio Marine HD, and Tokio Marine Group's basic policies including the "Tokio Marine Group's Basic Policies for the Administration of Group Companies", the Company shall conduct business activities.

  • a.
    The Company shall obtain prior approval from Tokio Marine HD at the time of planning business strategies, business projects and other important plans, and shall report initiatives based on the Group's basic policies and the progress of business plans to the Board of Directors and Tokio Marine HD.
  • b.
    The Company shall conduct the business management of subsidiaries in accordance with the Group's basic policies.
• (2)
  The Company shall establish a structure for operating the system for allocating its capital in accordance with the "Tokio Marine Group's Basic Policies concerning the system for capital allocation".
• (3)
  The Company shall establish its system for grasping its financial position and business results, obtaining approval from and submitting reports to shareholders and supervisory organizations, submitting tax returns to authorities in a proper manner, in accordance with the "Tokio Marine Group's Basic Policies for the accounting".
• (4)
  The Company shall establish necessary system for ensuring the appropriateness and reliability of financial reporting in accordance with the "Tokio Marine Group's Basic Policies for Internal Controls over Financial Reporting".
• (5)
  The Company shall establish its system for disclosing information on corporate activities in a timely and proper manner in accordance with the "Tokio Marine Group's Basic Policies for Disclosure".
• (6)
  The Company shall establish the necessary system for the realization of IT governance in accordance with the "Tokio Marine Group's Basic Policies for IT Governance".
• (7)
  The Company shall improve productivity and corporate value through comprehensive efforts to enhance employees' satisfaction and pride in their work and promoting fair and transparent personnel management linked with proper performance evaluation in accordance with the "Tokio Marine Group's Basic Policies for Personnel Matters".

• (1)
  The Company shall establish its compliance system in accordance with the "Tokio Marine Group's Basic Policies for compliance", as follows:

  • a.
    The Company shall ensure that all directors and employees respect the "Tokio Marine Group Code of Conduct" and give top priority to compliance in all phases of the business activities.
  • b.
    The Company shall establish a department supervising compliance and take initiatives for proceeding with matters concerning compliance by formulating annual action plans. Also, the Company shall establish a Quality Control Committee composed of members, a majority of whom are from outside of the Company, as an organ which makes suggestions and recommendations on matters concerning compliance to the Board of Directors' Meeting.
  • c.
    The Company shall prepare compliance manuals and widely promote compliance by means of training on laws, regulations, internal rules and other matters which all directors and employees must respect.
  • d.
    The Company shall establish reporting rules in the event of a violation of laws, regulations or internal rules and, in addition to usual reporting routes, set up hotlines (an internal whistle-blower system) to an internal and external organization while keeping all directors and employees well informed as to the use of the system.
• (2)
  The Company shall establish its system for efficient and effective internal audits within the Company by establishing internal audit department separate and independent of other departments and establishing rules for internal audits in accordance with the "Tokio Marine Group's Basic Policies for internal audits".

• (1)
  The Company shall establish its system for risk management in accordance with the "Tokio Marine Group's Basis Policies for risk management", as follows:

  • a.
    The Company shall establish its basic policies for risk management and conduct risk management concerning risks related to the Company's business activities.
  • b.
    The Company shall establish a department supervising risk management and appoint a responsible department according to risk categories which are designated as objects of control in its basic policies for risk management.
  • c.
    The Company shall formulate annual action plans for risk management.
  • d.
    The Company shall establish Risk Management Committee as an organization directly under the Board of Director's Meeting and promote total and comprehensive risk management through discussions in the Committee.
• (2)
  The Company shall establish its integrated risk management policies in accordance with the "Tokio Marine Group's Basic Policies for Integrated risk management" and perform quantitative risk management to maintain credit ratings and prevent bankruptcies. Also, the Company shall regularly monitor the volume of retained risks and amounts of returns as part of the integrated risk management on the entirety of the Group's business.
• (3)
  The Company shall establish its crisis management policies in accordance with the "Tokio Marine Group's Basic Policies for crisis management" and establish its system for crisis management.

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• (1)
  The Company shall, in accordance with the Business Management Agreement, formulate business projects (including numerical targets, etc.) in line with the Group's management strategies and business plans, and monitor the progress of such projects.
• (2)
  The Company shall establish rules regarding the exercise of authority and construct an appropriate organizational structure for achieving its business purposes in order to realize efficient execution of operations through a proper division of responsibilities and a chain of command.
• (3)
  The Company shall formulate rules for and establish a "Management Meeting", composed of directors, executive officers and other relevant persons, that shall discuss and report on important management issues.
• (4)
  The Company shall establish system for ensuring efficient execution of professional duties at the subsidiaries as well as the Company in addition to the above 1 to 3.

The Company shall establish its rules for the preservation of documents and other materials. The minutes of important meetings and documents containing material information regarding the execution of duties by the directors and the executive officers shall be preserved and managed appropriately in accordance with such rules.

• (1)
  The Company shall establish the Office of Audit & Supervisory Board under the direct control of the Audit & Supervisory Board Members for the purpose of supporting them in the performance of their duties. Upon request of the Audit & Supervisory Board Members, the Company shall assign full-time employees having sufficient knowledge and ability to support the Members in the performance of their duties.
• (2)
  Employees assigned to the Office of Audit & Supervisory Board shall perform duties ordered by the Audit & Supervisory Board Members and other work necessary for proceeding with audits, and such employees shall have the right to collect information necessary for audit purposes.
• (3)
  Performance evaluations, personnel transfers and disciplinary action concerning such employees shall be made with the approval of the Audit & Supervisory Board Members(Full-time).

• (1)
  Directors and employees shall regularly report to the Audit & Supervisory Board Members on management, financial condition, compliance, risk management, internal audits and other matters, and in the event that they detect a material violation of laws, regulations or internal rules, concerning the execution of operations of the Company or the Group companies or a fact likely to cause considerable damage to the Company or the Group companies, they shall immediately report thereof to the Audit & Supervisory Board Members.
• (2)
  The Company shall establish system to ensure that the Audit & Supervisory Board Members shall be reported by directors and employees of the subsidiaries or the ones having received the report from them, in the event that they detect a material violation of laws, regulations or internal rules concerning the execution of operations of the Company or the Group companies, or a fact likely to cause considerable damage to the Company or the Group companies.
• (3)
  The Company shall establish system necessary as to that directors and employees, who reported the matters as per above mentioned to the Audit & Supervisory Board Members, shall not be given any disadvantageous treatment because of the concerned report in the Company or the subsidiaries.
• (4)
  Directors and employees shall regularly report to the Audit & Supervisory Board Members on matters such as how the hot lines (the internal whistle-blower system) are used and reports and consultations made.

• (1)
  The Audit & Supervisory Board Members shall attend meetings of the Board of Directors, have the right to attend "Management Meetings" and other important meetings and committees, and express their opinions.
• (2)
  The Audit & Supervisory Board Members shall have the right to inspect at any time the minutes of important meetings and other important documents relating to decisions approved by directors and executive officers.
• (3)
  Directors and employees shall, at any time upon the request of the Audit & Supervisory Board Members, explain matters concerning the execution of their duties.
• (4)
  The Internal Audit Department shall strengthen its coordination with the Audit & Supervisory Board Members by assisting in the audit process and through other means.
• (5)
  The company shall pay all the expense and fees incurred regarding the execution of duties by the Audit & Supervisory Board Members, unless the company proves that they aren’t necessary for the execution.

Amendments to these policies shall be determined by the Board of Directors. However, minor revisions may be made by the General Manager of the Corporate Planning Department.