In recent years, regulators have become rigorous in response to the need for enhanced governance, adopting new regulations, addressing past failures, adapting to evolving technology and ensuring investor and stakeholder protection in dynamic global economies. Risk continues to evolve due to similar shifts like technological advancements, globalization, changing business models and environmental and social factors.
Artex offers strategies to assist its clients in managing governance throughout a lifecycle and in response to these changing regulations and risk. The professional services division provides clients with operational and administrative assistance to clients, which consist of captives and commercial insurance and reinsurance entities as well as ILS vehicles, including re/insurance entities, funds and holding companies. These services cover the following:
- Jurisdictional obligations
- Compliance regulations and governance oversight that support the entire lifecycle of the entity, from formation to day-to-day management
- Restructuring
- Regulatory filings
- Economic substance declaration submissions
- Direct liaisons and filings with regulators on behalf of clients
- Issuance of shares and maintenance of share register
- Directors and officers registers
- Maintenance of books and records
- Organising board and shareholder meetings and professional drafting of minutes and resolutions
Here Laquita Outerbridge, vice president and deputy head of corporate services, discusses how Artex works with its clients on corporate governance.
Why is corporate governance more important than ever?
Sound corporate governance plays a crucial function in fostering transparency, ethical conduct, accountability and the general operational success of the business. It promotes a sense of assurance to internal and external stakeholders — including regulators — that the board of directors is acting in good faith and honestly, and is exerting due care and diligence. A strong governance framework ensures proper policies and procedures are in place to mitigate risks and conflicts of interest effectively. Failure to implement best practices around good governance can place a company at risk of certain liabilities.
There are prescribed governance principles for certain regulated entities to address and follow, which are set out in various regulations and codes including the Insurance Code of Conduct. The Insurance Code of Conduct sets out expectations around addressing the requirement for independent directors on the board of an insurer. Similarly, the Insurance Sector Operational Cyber Risk Management Code of Conduct sets out minimum requirements for cyber risk assessment as well as standards for policies and procedures for insurers.
What are some of the critical governance considerations boards should be addressing?
The board of directors plays a pivotal role in ensuring that sound governance oversight is in place. Critical to governance is the role of the board and their fiduciary duties. The board also examines and critically assesses governance and finance matters, monitors compliance and risks, approves appointments and policies, and makes strategic decisions around the direction of the company. One of the more recent examples of the role of the board in governance matters relates to the Economic Substance Act and assessing their entity's status and ensuring compliance with the Act and regulations. Similarly, the boards of insurers and insurance intermediaries also have ultimate responsibility for ensuring compliance with the Cyber Risk Management Code applicable to them.
What are the benefits of having your corporate services provider affiliated with your insurance manager and/or fund administrator?
Having your insurance manager and/or your fund administrator affiliated and connected to your corporate service provider allows for enhanced communication lines around matters impacting the company, collaboration on operational matters, simplified authorization and efficiency with regulatory filings. These all-inclusive benefits not only create efficiencies and synergies but also opportunistically enhance good governance. An example of this benefit would be where optimal communication across the multiple service providers in house helps to ensure that proper board and shareholder approvals are obtained where required and on an efficient basis.
There's a similar benefit to streamlining regulatory filings such as economic substance declarations (ESDs) where input is required across all key service providers and stakeholders, which can be made more efficient with a combined service team. Where separate service providers are used, the companies and service providers need to communicate regularly and discuss governance matters, requirement for approvals etc., and in practice, these communications aren't always optimal, resulting in missed governance actions and approvals.
Having a combined commercial outsourcing service provision under the same roof — as we have at Artex — creates multiple efficiencies and allows for seamless service provision.
What are some corporate governance best practices?
Ultimate responsibility for a company rests with the board of directors. As such, it's key in ensuring that the company embeds and maintains strong governance. The structure of the board will assist it in the company's corporate governance efforts. The board itself should be suitably qualified and experienced, and there should be a diversity of areas of expertise across the board.
A board of directors should ensure not only that the minimum requirements of legislation, rules and regulations related to corporate governance are applied, but also that the key officers of the company employ and maintain best practices. Governance best practice should ensure mitigation of significant risks and application of a code of ethics relevant to the company setting out the standards by which the board expects the company to be operated. Ongoing monitoring of statutory, regulatory and relevant Code obligations as well as company policies in relation to governance must be assessed and reviewed at least annually.
What are some of the key considerations around ESD filings?
The board of directors must first assess whether the company falls in scope for one or more relevant activities pursuant to the Economic Substance Act and its related regulations. Thereafter, relevant activities should be assessed annually, as the company may conduct activities that fall under one or more different relevant activity definitions or may change the category of relevant activity they are conducting, throughout the year. This is particularly the case where financing and leasing activities may be captured for some or all of the applicable financial year. The board will need to ensure that all Core Income Generative Activity (CIGA) is performed in Bermuda.
The ESD, once drafted, will need to be reviewed and approved by the board. The Registrar of Companies is the regulator for the Bermuda Economic Substance Act and its related regulations and as such, ESD filings are made on the Registrar of Companies online portal. The board of directors not only must approve the company's ESD but also must properly authorize and appoint the person or entity that files the company's ESD on the Registrar of Companies' online portal. Filing must be made annually within six months following the date of the company's financial year-end.
Laquita Outerbridge is VP, Deputy Head of Corporate Services. Laquita holds extensive corporate services and compliance knowledge and experience, most recently working with one of the largest international insurance and reinsurance companies where she was the AVP, Regulatory Compliance Specialist, in Bermuda for eight years and based in their London office the past five years. Previously, Laquita spent six years as a paralegal and regulatory compliance officer to the general counsel at a NYSE listed reinsurance group company and prior to that she spent over nine years in corporate services and governance in fund administration. Laquita is responsible for managing the Corporate Services team and supporting the governance and growth strategy of the Artex Corporate Service function.
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