Airmic and Aon partner on captives

As captives have become an increasingly important part of a risk manager’s toolkit, UK-based risk management association Airmic has refocused its energies on promoting the sector and offering new research and opportunities for its members.

This is according to Julia Graham, deputy CEO and technical director at Airmic, who spoke to Airmic Today ahead of the 2019 Airmic Conference in Harrogate, UK.

“Our members tell us that captives are still important, and I don’t see that level of importance diminishing. If anything, the captives are increasingly important, in areas that the insurance market struggles to accommodate or in terms of data collection, which a captive is a very good vehicle for,” said Graham.

Airmic’s captive special interest group held its most recent meeting on May 9, a planned quarterly event that outlines key issues relevant to Airmic’s members and forms the basis of the research and guidance it publishes.

Captives are becoming more sophisticated and are insuring more complex risks than they have in the past, according to Graham. New lines of business—such as cyber and employee benefits—are being added to captives for the incubation of data or cover, which creates the need for more robust governance.

Furthermore, captives face increased scrutiny from national tax authorities and the Organisation of Economic Co-operation and Development (OECD), which considers captives to be vehicle that encourages profit-shifting and tax avoidance.

Against this backdrop, Graham said, it is particularly important that Airmic members—and captive owners in general—are aware of good governance practices.

Airmic has partnered with Aon to publish a practical guide for independent non-executive directors (iNEDs) on captive boards, an area where she feels there is a lack of guidance available to captive owners.

Designed as a resource for individuals currently serving as directors on captive boards, or considering an appointment in the future, A Practical Guide for Independent Non-Executive Directors on Captive Boards contains valuable information for captive managers and captive owners when considering new appointments to the board.

It is also relevant for risk managers who want to re-evaluate the effectiveness of their captive’s board and iNEDs.

“The reason we produced it is that people were asking for a guide like this and I couldn’t find one. It was also brought up at the captive special interest group’s meeting; there just wasn’t much out there in the public domain,” Graham explained.

“If you don’t have that independence, you are open to scrutiny from the regulators.”

Ann O’Keeffe, chief risk officer, captive & insurance management at Aon, said: “As captive insurance companies become more sophisticated and attract increasing levels of regulatory scrutiny, the role of iNEDs on the board has continued to grow.

“They play a central part in the development of effective levels of governance and the provision of expert insight.”