How Captives Should be Managed

By: James Rawcliffe FCA, Vice-President – Sagicor Insurance Managers Ltd.

You are at the beginning of the captive formation journey and a key decision upcoming is your choice of insurance manager. The Manager represents a key relationship with you on the captive team of service providers, who you will rely on in several ways, the key two being the interface between you and the Cayman regulator, and to assist you to ensure the overall governance of your captive remains on course, akin to the role of a vice-captain. A simple scrolling down of the directory of insurance managers listed on the Insurance Managers of Cayman, manager-specific websites or brochures is a starting point only and will require further due diligence on your part to determine what makes that insurance manager tick and whether they would be the complementary fit both to you, and also with the other service providers you have selected.

The array of insurance managers in Cayman is highly impressive, all are gifted, but here is what I view as the character traits of an insurance manager you can depend on:

• How responsive is the insurance manager to your emails or telephone calls? This is a barometer to assess how important your business is considered.

• How willing is the insurance manager to work with you to solve issues? The words “we’ll work with you” will help set the scene for a solution to be reached. An example of this is going into bat on behalf of your captive, whether it is working on your behalf regarding the acceptability of an accounting treatment with your auditors or on a business plan amendment needing to be approved by Cayman Islands Monetary Authority.

• The insurance manager not only performing the minimum obligations of financial and regulatory reporting, but being on hand to guide you as your obligations as Directors under Cayman company law, also to give value added advice, if asked, as to the overall direction and performance of your captive’s insurance program.

• A transparency to admit a lack of knowledge to certain technical questions asked, such as the US tax implications of an insurance transaction, with a willingness to refer you to the relevant expert for the answer.

• The ability to go the extra mile in chasing down and managing accounting information inflows by service providers – banks, asset managers, third party loss administrators – required to complete a captive set of accounts by deadline. In addition, where necessary, the willingness to seek your help in chasing up the service providers for the information in advance of deadline, as opposed to being the insurance manager reporting the accounts late and saying to you plaintively “ I did not receive the information in time”.

• To critically evaluate the information received when reporting the financial statements and if accounting information indicate trends which might uncover a future problem, anticipate and report to you suitably early as to allow corrective action to be taken.

• The obvious need to be on time with deliverables that you have set, whether it’s the quarterly management accounts, the minutes following a board meeting or the one requiring most patience, the timely completion of the annual audit. How your insurance manager gets on with your audit firm is a good indication as to the quality you are receiving. A good insurance manager will work with the auditors to chase up those outstanding audit confirmation responses, be prompt in getting those note disclosures completed, support them in their discussions with you if they have to discuss accounting/audit issues arising (if the auditor is in the right!).

• Ability of the insurance manager to relate to you, and build up a friendship over time. This is not easy with firms where staff turnover means you are dealing with a new account manager every three years. During client board meetings, one of my former leaders not only would impress with his technical skills but also with his encyclopedic knowledge of American sports. The clients would enjoy the witty banter, look forward to their future visits to Cayman, to conduct business and the chance to argue sports with the insurance manager.

• The insurance manager’s respectful attitude to peers in the Insurance Industry, and above all enjoyment of the insurance management profession will tell you a great deal as to the character of same and as to the extent of service you can expect to receive.

In conclusion, I trust this article will or has caused you to reflect upon the role of the insurance manager as someone more than a custodian of book and records and submitter of financial data, and thus may assist you in how you go about selecting your insurance manager.