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Governance Standards Checklist for RRGs and Captives

Checklist Featured
September 01, 2016

Risk retention groups (RRGs) face some common sense but rigorous policy and governance standards that need to be incorporated in their plan of operation.

Your Captive.com editors thought it might be worthwhile to share a checklist of the items that the National Association of Insurance Commissioners requires in its model standards. In numerous instances, compliance with the new standards may only require tweaking of RRG board policies. Required dates for governance standards to be in place vary depending on the domicile. It should also be helpful to nonRRG captives to measure their policies and governance standards with the checklist.

Governance Standards Checklist

Yes/No 

1. Has your risk retention group (RRG) governing adopted a plan of operation that meets the written policies and governance standards that are required if your state of domicile is to continue to be accredited? If your response to this question is “no,” review the checklist of requirements below.

 

2. Does your captive provide written evidence of ownership to each member?

 

3. Does your captive have written governance standards?

 

4. Does your captive board have a written policy regarding the evaluation of management, including the captive manager and the party or parties responsible for underwriting, adjusting or settling claims, and preparing financial statements?

 

5. Does your captive board have a written policy that requires reviewing and approving the amount paid under service provider contracts?

 

6. Does your captive review and approve the following at least annually?

  1. The goals and objectives relevant to the compensation of officers and service providers
  2. The performance of the officers and service providers as measured against the RRG’s goals and objectives
  3. The continued engagement of the officers and material service providers

 

7. Is the audit committee comprised of at least three independent directors?
Note: In Vermont, small RRGs can request the Insurance Commissioner to approve the entire board to serve as the audit committee.

 

8. Does the board have a written audit committee policy that describes the following audit committee responsibilities?

  1. Assisting board oversight of the integrity of financial statement compliance with regulatory requirements and the qualifications, independence, and performance of the independent auditor of actuary
  2. Reviewing audited financial statements with management
  3. Reviewing audited financial statements with the independent auditor
  4. Reviewing assessment and risk management policies
  5. Meeting with management
  6. Meeting with the independent auditors

 

9. Has the captive adopted governance standards that include the following?

  1. A process by which the directors are elected by the owner/insured
  2. Director qualifications, responsibilities, and compensation
  3. Director orientation and continuing education requirements
  4. Director access to management and independent advisors
  5. Policies and procedures for management succession

 

10. Has the board adopted a code of ethics policy for directors, officers, and employees?

 

11. Does the code of ethics policy address each of the following areas?

  1. Conflicts of interest
  2. Matters covered under the corporate opportunity doctrine in the RRG or captive state of domicile
  3. Confidentiality
  4. Fair dealing
  5. Protection and proper use of RRG or captive assets
  6. Standards for complying with applicable laws, rules, and regulations
  7. Mandatory reporting of illegal or unethical behavior affecting the operation of the captive
 

 

Download a PDF file of the checklist above.
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