Cim Global Business
Malcolm Cutts-Watson discusses his new role as adviser at Cim Global Business, as well as the state of the captive insurance market
Cim Global Business has recently launched its accounting outsourcing offering to captive insurance managers. What are Cim’s plans in the captive space?
Firstly, let me provide some background on Cim Global Business. Based in Mauritius, Cim Global Business is an experienced cross-border service provider to well-known corporate and institutional clientele, including Fortune 500 companies, through its 250 staff (with a large proportion being accountants). It is part of the Cim Group, which is listed on the Stock Exchange of Mauritius. Mauritius has developed itself as a premium service centre, compared to more traditional outsourcing markets, by offering an abundance of highly qualified accountants, bilingual labour force (English is an official language) and world class IT infrastructure.
Cim’s vision is to enable captive insurance managers across a variety of high-cost domiciles to maximise efficiencies through significantly reducing the ongoing operational costs of the structures they oversee. Cim offering is well-suited to insurance managers that don’t have their own back-office operation in a lower cost domicile, and that wish to leverage the benefits of the qualified and technically proficient accountants in Mauritius.
Cim has broadened its existing captive accounting capabilities by hiring Shaun Geils last year as head of operations of its outsourcing business, which focuses on captive insurance. Shaun is a qualified chartered accountant who is familiar with leading insurance managers’ operating models, having previously worked as a captive insurance and insurance-linked securities (ILS) manager for the Kane Group in the Cayman Islands for seven years.
In addition to a strategic outsourcing solution, Cim is finding increased interest from insurance managers for assistance during times of staff turnover, as well as enabling them to minimise hiring full time staff during peak periods. By leveraging Cim’s back-office, non-client facing services, insurance managers can benefit from significant cost benefits as the work is conducted from a more cost effective domicile and managers are thereby able to allocate more of their valuable time and resources to strategic and revenue enhancing activities. Cim’s team of accountants are well-versed in the operational aspect of captive insurance management, thereby allowing the benefits of wage arbitrage to be enjoyed without diminishing the quality that insurance managers and their clients have become accustomed to.
Cim’s core services include conducting the full client accounting cycle (and audit process management) for captive insurance, risk retention groups and ILS structures. In collaboration with its in-house IT software development team, Cim also has the expertise to work with insurance managers, and their clients, on the design and implementation of customised IT-based solutions that allow for efficient streamlining of data intensive processes, thereby enhancing the reporting and information being received (and managed) by insurance managers.
In your capacity as adviser, what are you telling Cim about captive managers and how they do accounting? What problem is Cim attempting to solve?
The perennial challenge to captive managers is to make the best use of their most precious resource—people. Typically, salaries are the highest overhead and it is a challenge to find, train and retain talent. Outsourcing routine accounting work enables management to direct their people to higher valuegenerating work such as deepening client relationships or bedding in new business, confident that the regular financial reporting occurs accurately and on time. In my experience, outsourcing does not lead to redundancies, but more of a refocusing of existing talent.
Accounting for captives is becoming more complex as the parent companies of captives move to common international financial standards with attendant increased disclosure in the notes. However, a number of domiciles permit captives to adopt local accounting standards. Add to this mix increased granularly of regulatory reporting, take Solvency II as an example, and the captive accountant has to be the master of a broad range of accounting policies and standards. Use of outsourcing allows efficiencies to be achieved in terms of the ongoing training and education of accounting personnel to deliver compliant accounts.
Outside of your work with Cim, what emerging trends are you currently seeing in the captive market?
In my view, increased competition and segmentation. I think currently there are more than 70 recognised domiciles globally and that number is set to rise as remaining US states pass the necessary legislation. In addition, financial centres are looking to broaden their proposition by adding captives to their menu of services. Take Mauritius, for example. This proliferation in captive locations can lead to a diffusion of captive accounting skills and so the use of outsourcing can ensure critical mass of insurance accounting expertise is achieved.
The myth that captives are only relevant for the largest companies has been exploded with the rise of captives in the small- and medium-sized entity market, be it enterprise risk captives, cells, or members of mutual or association captives. This growth began in the US but we are seeing signs that it will be replicated elsewhere.
Finally, Asia is a sleeping giant. I expect the captive concept to be embraced, primarily in China, resulting in 200 new captives writing $20 billion premium within 10 years.
Tax planning has obviously been in the headlines of late, but captives have long been under scrutiny, particularly in the US. How are managers working with their clients to make captive tax arrangements more transparent?
Captives remain a valid risk financing strategy. I can see that because the captive financially benefits from improved risk management by the policyholder/owner, this would lead to scrutiny. However, I feel the captive industry is too defensive in how it responds to this exposure.
I see this as a perfect opportunity to explain the benefits of, and value generated by, a captive. It will require more transparency of process and governance, but captives, in general, are well managed and able to demonstrate they are properly run and formed for solid management of risk reasons. For example, the introduction of the Solvency II regime ensures European captives hold adequate capital reserves, follow best risk management practices and report regularly to key stakeholders.
I do recommend that the captive’s strategy be aligned with its parent’s business plan and that a strategic road map be prepared for the next three to five years of the captive’s life with attendant milestones and key performance indicators highlighted. This way, the value of the captive can be demonstrated to internal and external stakeholders.
