Captive Insurance Company Reports, February, 2019
In late 2018 SRS in conjunction with IRMI organized a corporate governance survey to determine what kind of corporate governance some captive insurers, risk retention groups (RRGs), and risk pools have in place. In this article Derick White provides an objective write-up of the survey findings.
Since the failures of several entities in the 1980s, regulatory bodies have issued a steady stream of standards and requirements relating to corporate governance, all in the hope of avoiding similar spectacles. For publicly traded companies, the Europeans issued guidelines requiring procedures and disclosures to be attested to in their filings. The United States has the Sarbanes-Oxley Act, which requires chief officers to certify that facts and figures are correct. The US insurance industry, through the NAIC, follows the “Annual Financial Reporting Model Regulation,” and, just a few years ago, RRGs were required to adopt “Corporate Governance Standards for RRGs.” These insurance-related model laws required procedures whereby companies adopt certain statements of standards that should help provide an underlying structure of good corporate governance.
Many captive insurers and risk pools do not fall under the above regulatory requirements and wonder what the best structure of corporate governance is for their entities. RRGs, being fairly new to required standards, should be curious as to what other companies are doing. This survey, commissioned by SRS and IRMI, was conducted to determine what these captives, RRGs, and risk pools have in place regarding corporate governance. The survey considered the following:
- Background of the insurer, to set a baseline of size and form
- Structure of board, to determine the size and other attributes
- Accountability of board with procedures currently in place, advancing to other considerations
Most companies have given thought to corporate governance practices and have some standards in place, as follows.
- Most boards (44 percent) meet annually versus any other time period.
- Most boards (71 percent) have less than seven members.
- The majority (51 percent) have no standing committees.
- 68 percent have a code of ethics or conduct in place.
- 81 percent do not have formal succession plans for management and the board.
- 59 percent do not have formal education requirements or offerings for the board.