The Evolving Role of the Insurance Manager: Part 1

Feb 19, 2024 7:30:00 AM

This blog is part one of a two-part series by Barbara Fawcitt, Assistant Vice President at USA Risk Group (Cayman) Limited and James Trundle, Vice President at Global Captive Management Ltd. (GCM). In the next part, we’ll explore due diligence, data and stewardship, financial soundness, and the dual obligations of the Insurance Manager. Stay tuned for part two coming later this month!

The Captive industry has a robust history in the Cayman Islands, with the first Captive established there in 1976. Nearly 50 years later, much has changed – especially the role of the Insurance Manager.

The Insurance Manager is the principal service provider of this industry, a role that includes extensive expectations. The primary expectation is that the Manager is the presence for the Captive entity in the domicile. This means the Manager is responsible for financial statement preparation, maintaining the business plan, budgeting and forecasting, maintaining all books and records, coordinating and leading the company’s Board of Directors meeting, and much more. In this two-part series, we’ll explore the ever-changing role of the Insurance Manager as the Captive industry continues to evolve.

Manager as Product Designer

We recently had a prospect visit us in Cayman. Now that Cayman’s borders are open for visitors, visits from clients and prospective clients are once again a regular sight. We are seeing a continued interest in Captive insurance and a strong pipeline, both for our respective firms and for the Cayman Islands as a jurisdiction.

This prospect had an interesting business model at the parent company level, the likes of which we had never seen before. After initial discussions, it was clear that they were coming to us to discuss that model, the various risks they were facing, and for us to design a vehicle that worked for them. We found this to be a fascinating example of how the role of the Manager has changed in the last two decades. The prospect is not bundled up in fancy wrapping paper and dropped on your doorstep ready to unwrap and start business. The Manager is now the designer and the innovator in the world of alternative risk management.

A brief review of the Cayman Islands Monetary Authority (CIMA) Statement of Guidance on the Responsibilities of the Insurance Manager states that the Manager should provide insurance, risk management, and underwriting expertise to the Captive. It’s clear that the Cayman Regulator agrees that the provision of underwriting expertise is a responsibility of the Manager. This has resulted in a change in the dynamic of any office environment at any Manager. If you walked into a Manager’s office in the late 1990s or early 2000s, chances are that the first person you would speak to would be an accountant. After all, one of the most significant aspects of the role is the completion of financial statements. However, if you stroll into an Insurance Manager’s office in 2024, you’re just as likely to bump into someone with underwriting experience or compliance and risk management qualifications as you are an audit background.

Changing Regulatory Landscape

Another brief review of the Statement of Guidance on the Responsibilities of the Insurance Manager also makes it clear that a Manager should assist a Captive with fulfilling their legal and regulatory obligations. This goes beyond the narrative that you would likely see in the early days of captives, where the Manager may simply be noted as the point of contact between the Captive and the Regulator.

Fulfilling the legal and regulatory obligations of a Captive in an environment that is continuously adapting to changes in international law can be challenging to say the least. This is why the Manager will have a dedicated compliance function and external legal counsel at hand to navigate this difficult landscape. Captive Boards should be familiar with the ongoing changes in law and regulations and Boards should start to expect their own external counsel to be present at their Board meetings, supporting both the Captive and the Manager.

Ten years ago, a Captive insurer might have a handful of frameworks and procedures regularly being reviewed by the Board of Directors. Over the last decade alone, we’ve seen the expansion of Captive policies and procedures to include risk management frameworks, corporate governance frameworks, outsourcing policies, cyber security frameworks, anti-money laundering policies and procedures, Board of Directors succession planning, Board of Directors self-assessments and more - all of which require annual review and approval by the Board of Directors.

Face of the Jurisdiction

The Manager is the physical presence in the jurisdiction and, as such, is the main point of contact with all service providers, in both the jurisdiction and overseas. They are not only representing the Captive but also the jurisdiction in which that Captive is based. For some stakeholders, the Manager is the only person they speak to in the jurisdiction, and they need to represent the very best that these jurisdictions have to offer. This will often involve the continuing fight against negative publicity caused, in part, by Hollywood’s perception of the jurisdiction which does not reflect reality. If we had a dollar for every time someone made a reference to people coming into the Cayman Islands with a suitcase full of money, we’d have a suitcase full of money! It’s a stigma that the Manager needs to counter on a daily basis. The Manager is marketing the jurisdiction in all of their daily dealings with stakeholders from outside the jurisdiction.

Banker and Controller

Another way in which the Manager’s role has evolved is in respect to the bank accounts relating to the insurance business of the client. Specifically in the Cayman Islands, CIMA requires the Manager to not only safeguard the assets belonging to the client but also for those assets to be controlled by the Manager from within the domicile. Given the Manager is licensed by CIMA and the Manager’s systems, processes, and controls must comply with CIMA’s Rules and Statements of Guidance, then it is understandable for CIMA to take this stance. By having the Manager in control of the bank account, it ensures that the Manager has oversight over all transactions, allowing them to consider whether any transaction requires a CIMA notification or even a prior approval.

In recent license issuances from CIMA, we have seen a condition of the license state that the minimum capital amount must be held in a Class A Cayman Islands bank. This creates additional responsibilities for the Manager to ensure that the balance in the client’s local bank account does not fall below that minimum capital required.

USA Risk Group Communications Team

Written by USA Risk Group Communications Team

USA Risk Group is the independent alternative risk advisor with proven integrity and innovative ideas that has been taking insurance in a different new direction since 1981. Our communications team works directly with our company's leadership to ensure all news and updates about our organization and the captive industry are shared for all constituents.

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