In a recent Global Captive Podcast short, produced in collaboration with We Are Guernsey and the Guernsey International Insurance Association, Richard Cutcher discusses the developing role of independent non-executive directors (iNEDs) on captive boards with guests Julia Graham, Airmic CEO and iNED on three captive boards in Guernsey, Peter Child, CEO for Europe at Strategic Risk Solutions and Nick Wild, a local iNED with many years’ experience in captive management.
Here, we outline some of the key takeaways from the podcast.
Guernsey is currently one of the only domiciles with a requirement for a captive to have an iNED, a director with no relation to the captive manager or shareholder, in accordance with Appendix 3 of Guernsey’s Finance Sector Code of Corporate Governance.
As captive numbers continue to rise, with Guernsey holding the title of Europe’s largest captive domicile, efforts are being made to broaden the pool of qualified directors.What does an iNED do?
Julia explained that the role comprises helping to govern, lend experience and knowledge, and to be abreast of current developments in the industry.
“I think that’s true of any director, whatever entity you’re talking about, and it’s never been truer of captive boards today,” she said.
And as regulatory oversight increases, putting greater onus on captive boards, Nick said it means iNEDs need to be more engaged and involved than perhaps they were in the past.
“They need to not just participate in the board meeting but understand and participate in the business. I think that should be welcomed,” he said.
According to Peter, flexibility is key. He said: “We’re looking for someone to add genuine value. What I mean is understanding the rationale for the formation of the captive in the first instance, and then being able to adapt as perhaps the captive turns from a tactical solution to a specific issue, to a more strategic play in the longer term.” Should other jurisdictions consider including a requirement for iNEDs?
Peter explains: “To my mind the additional requirement of an iNED would be a marginal cost increase and would be far outweighed by the increased value in terms of overall governance.”
Julia said the regulatory comfort provided by the requirement is something that attracted her, and the parent she worked with, to Guernsey.
She further notes Guernsey’s innovation in other areas, saying: “Guernsey has got a great reputation in producing work on ESG. We shouldn’t forget that it’s really blazed a bit of a trail.”
“I think the value added in Guernsey should be replicated elsewhere, but that’s for other domiciles to decide,” Nick concluded. How many captive directorships can one person hold?
While there are not any restrictions on the number of iNED positions one person can hold currently, the topic is under discussion by regulators.
Nick warned of independent directors spreading themselves too thinly, stating that roughly 10 directorships seem right based on his experience as an iNED.
Peter agreed, adding that if too many directorships are undertaken, “You can’t understand the culture of the parent, you can’t add to the strategy of the captive, you can’t properly understand the risk management strategy. It becomes a bit routine.”
However, Julia said she would be ‘disappointed’ if regulators felt the need to restrict the number of appointments, explaining: “There’s no blueprint for this and I think the answer is driven by the nature, scale and complexity of the boards that you sit on.”Educating future iNEDs
Nick highlighted the NED Development Programme launched by Guernsey’s GTA University Centre. The course provides mentorship opportunities guiding people through the processes and mechanics of operating a board, including captive boards.
Listen to the full podcast discussion with Richard, Nick, Peter and Julia on the Global Captive Podcast here, or on any podcast platform. Just search for ‘Global Captive Podcast’ on your podcast app of choice.
