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As captive governance matures, should iNEDs be required in more domiciles?


  • Guernsey and Isle of Man only major captive domiciles where an iNED is required
  • Increasing governance requirements put greater onus on captive boards
  • Efforts made in Guernsey to broaden the pool of qualified directors available to captives
  • Restriction on board appointments under discussion in Guernsey

The corporate governance requirements for captive boards is only increasing and it has been questioned why more domiciles do not require independent non-executive directors (iNEDs).

In a discussion recorded for the Global Captive Podcast SRS Europe CEO Peter Child, local iNED Nick Wild and Airmic CEO Julia Graham debated the evolving role of captive directors, the greater onus put on them by regulators, whether there should be a limit on the number of positions one individual can hold and if other domiciles should introduce the requirement.

Wild said that a lot has changed for iNEDs and for the broader governance of captives over the past 30 years.



“Certainly the element of corporate governance and regulatory oversight has increased massively over that period and that’s a good thing overall,” said Wild.

“It has meant that the role of the independent non-executive director has become much more focused than it used to be.

“They’re (the regulator) expecting that director to raise with them problems if they arise and are not properly resolved. Now that happens extremely rarely, of course, but it’s an extra onus on the iNED.

“The iNEDs are, in my view, much more engaged and involved than they used to be. They actually want to not just participate in the board meeting, but participate in the business.

“They want to understand why the business is going in that particular direction. They may have suggestions of their own as to how that should develop and I think that should be welcomed.”

Graham, who in previous roles as a chief risk officer has worked for captive owners, is now an iNED on three captive boards in Guernsey.

She said that while a lot has changed over the past 20 years of her experience with captives in the domicile, the role of a captive director should not be viewed as different to that of a director on any board.

“You are there to help govern, you are there to lend your experience and your knowledge, and you’re there to be current and informed,” she said.

“I think that’s true of any director, whatever entity you’re talking about, and it’s never been truer, I think, of captive boards today.”

Should other domiciles require iNEDs?

Guernsey’s Licensed Insurers Corporate Governance code requires a captive’s board of directors has at least one iNED, which is someone with no relation to the captive manager or shareholder.

Guernsey and the Isle of Man are the only major captive domiciles that have the iNED requirement.

In Switzerland there is a requirement for all insurers to have an iNED, but captive reinsurers with a C3 licence can request an exemption from the Swiss Financial Market Supervisory Authority (FINMA) and it is almost always approved.

Child said while there is no requirement to have a resident board director, for practicalities Guernsey captives usually have them.

“You don’t have to have a minimum of locally qualified or locally resident directors, but with the requirements for substance and tax, then all key income generating decisions have to be shown to be made on island,” he explained.

“Therefore, purely as a result of practicality, we tend to try to have a majority of directors who are either resident on island or at least able to be on island at fairly short notice to make those key decisions.”

The topic of outside board directors was discussed by a group of European iNEDs and captive practitioners in a GCP Short released in December 2022, including a call for an “international discussion” for captive board criteria.

Earlier this month the European Insurance and Occupational Pensions Authority (EIOPA) published a draft opinion concerning the supervision of captive (re)insurance undertakings, including a section on governance, but there was no mention of changing board requirements.

Child said he understood why US domiciles did not have it as a requirement because of the competitive environment between jurisdictions, but was surprised it was not a feature of Solvency II regulation in the European Union.

“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 so that does surprise me,” he added.

Wild said he found it “very surprising” there are not requirements for iNEDs in other captive domiciles.

“There are many conflicts of interest in a captive arrangement,” he said.

“Shareholder and insurer being one and the same, always the managers have some form of conflict of interest. They’re providing a service for funds so I think it’s surprising and I think the value added in Guernsey should be replicated elsewhere, but that’s for other domiciles to decide. They’re financial institutions, they do a lot of financial transactions, there’s anti money laundering. So I think they’re missing a trick.”

Talent pipeline

With captive numbers growing in Guernsey and some opting to appoint numerous iNEDs to a board, there is an ever-greater demand for qualified professionals to fill the positions that are opening up.

Guernsey benefits from its proximity to London and the volume of insurance and professional service experts in the United Kingdom, but Wild said some independent directors can risk spreading themselves a bit thin if they have too many appointments.

“We can pull on a whole pool of people from the UK, for example,” Wild said.

“A massive insurance market, extremely experienced people on the law side, on the accounting side, on the insurance side that we could bring in. More of that is happening, but the level of directorships one can and should have is a matter that’s been under debate for some time.

“The regulators have been looking at it over a period of time, they haven’t actually made any moves as yet.

“I personally think from my own experience that up to 10 is kind of okay. More than 10 is stretching it because if you’re really going to engage in the way that I like to engage on mine, I don’t think you’ve got much room for more than 10.”

Graham said while she agreed that directors need to be cognizant of the number of appointments they take on, she did not think a prescribed number would be the right way forward.

“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,” she added.

“I’ve got one board, which is a material investment of my time, there’s no doubt about that. 

“I’ve got another board which isn’t and I can’t say that one plus one is two, it’s more like one is five, plus one is six, so I think to some degree it’s always going to be an extension of what you’re doing and what is demanded of you.

“I would be a bit disappointed if a regulator felt they needed to introduce a physical number.”

Child said he understood that not all board positions should be equal, but a maximum number could be introduced.

“Twenty-five for instance,” he said. “We talked earlier about adding genuine value and switching mindset from industry to industry.

“To my mind, there is no way you can add genuine value to that number of boards. You can come in and do a replica job on each board, and you can pick up on the minutes, you can pick up on the financial statements, fabulous.

“But you can’t add to, properly, the culture of the parent, 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.”

Wild touched upon the NED Development Programme, which was launched by GTA University Centre, and is providing mentorship opportunities to professionals interested in becoming an iNED, including on captive boards.

“The GTA has provided this programme where organisations such as the Guernsey International Insurance Association (GIIA) and the other associations on the island have identified companies that will take somebody in for a year and have them attend board meetings, have them mentored by maybe a non-executive director that’s already on the board, such as myself, and guide them through the processes and the mechanics of operating a board and what goes on,” he said.

“I’ve participated with four candidates on that, that’s been very valuable. I’ve actually learned a fair bit along the way from them as well.”

Listen to the full podcast discussion with 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.