Despite massive steps forward in captive corporate governance legislation, risk managers are still concerned about board members’ location and lack of captive knowledge.
Legislation such as Solvency II and Ireland’s new corporate governance code has made “dramatic” improvements in the way a captive is governed.
Despite this, Creighton Twiggs, group risk manager of Clariant International, said he “certainly has” dealt with board members who lack an adequate knowledge of captives. “In this situation the captive owner has to just get rid of them,” he said.
One captive owner, who wishes to remain anonymous, is very concerned about having non-executive board members located in the captive domicile, to avoid the reputational risk of being seen to run a “post box captive”.
He said: “Captives are operating as insurance companies but there are very few people that sit on the board who know much about the risks the captive covers. A captive board needs people who can say no to certain business.”
However, Peter Mullen, CEO of Aon captive and insurance management, said: “I think the idea of a captive being a post box company is in the past.
“From the perspective of the quality of captive board members, fitness and probity standards are imposed in all significant domiciles.
Independent non-executive directors are generally very experienced insurance professionals and from my experience, based in the captive domicile and not remote.
“There are new challenges to captive board members now whether they are independent non-executive directors or were recruited from the parent. There is a huge amount of compliance which didn’t exist 20 years ago.
“This will be harder for European captive board members who have to deal with Solvency II,” he added.