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Corporate Regulation and Governance in Captives

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Delve into captive insurance governance matters including board attributes, board structure, and board accountability. With 30 years of insurance experience from the auditing, regulatory, and management side, Derick White, managing director of corporate governance and regulation for Strategic Risk Solutions, offers key insights into captive board governance.

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Captive Insurance Boards Need Education To Keep Pace

Board of Directors
March 14, 2016

Recent news reports about the Wounded Warrior Project, a charity for veterans, may raise the question of the board of directors role and responsibility in any organization when allegations of excesses occur. If the allegations are true, the senior management team is certainly responsible, but the board of directors also has a fiduciary responsibility to monitor what transpires.

All boards, from large corporate entities to small nonprofits, have to focus on risk management, as pointed out in a recent Risk & Insurance article by Joanna Makomaski. There is an increased need for risk management training, especially at the board level, Ms. Makomaski's March 1, 2016, article, titled "Risk School for Boards," indicates.

"Most boards consist of great people, who want to do a great job," the article states. "But there is a problem with giving this oversight responsibility to our boards, especially if they are ill-equipped."

This comment holds true within the captive insurance industry as well. Current market conditions have played a role in increasing the need for boards to understand and proactively deal with the risks embedded within their captives. Soft market pricing, low investment yields, new and more complex products, and escalating claims costs are increasing the risks to the captive. The question is whether the education of the board has kept pace.

The preponderance of board meeting time is spent on fiduciary items, which entail looking back in time; for example, reviewing financial statements, investment reports, and claims. Does your board set aside any time during the year for training and education? Are you staying current on developments within all facets of the captive industry? If not, why not?

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