Guidebook for Captive Insurance Company Board of Directors
Chapter Five - The Board Manual and Board Minutes

"Why a four year old child could understand this report. Run out and find me a four year old, I can't make head or tail of it."
Groucho Marx in Duck Soup

A board manual can be a very important resource to help board members stay organized and to use with the business plan to track and plan the company's progress. It also can demonstrate to the regulators the company’s commitment to good corporate governance.
A board manual should contain at least the following:
A. Organizational introduction which will outline the mission statement the value statement, the statement of purpose and the board planning calendar i.e. how many meetings are held each year and where the meetings are held.
B. The license and business plan of the captive as well as any changes in that business plan and the regulatory approval of those changes.
C. The articles of incorporation, bylaws and any amendments including information on stock issues.
D. The agendas and minutes from every meeting in chronological order.
E. List of the Board members with biographical information and contact information.
F. Financial reports since inception – i.e. balance sheet and income and loss statements.
G. The captives last year end audited financials.
H. Results of regulatory examinations.
I. Committee reports and annual reports of the chief executive officer.
Each member of the Board should have his or her own board manual and when a new director comes on board he or she should be presented with a complete board manual. The construction of the board manual should not be delegated to a captive’s staff or to the captive manager rather the Board should view this duty as a function of the Board itself. If the opportunity presents itself, volunteer for the position. Practically the board manual should be contained in a large three ring binder with tab dividers allowing for the insertion of documents on an ongoing basis. Of course, the board manual can also be created electronically so that Board Members do not have to lug it around to each meeting unless that is their preference.
Captives are subject to examination by the domicile regulators. There will be an organizational examination when a captive is licensed and there will also be examinations every three years minimally. As pointed out in prior chapters, responsibility for the operation of the captive ultimately rests with the Board of Directors. Typically, not enough attention is paid to the importance of the minutes of the Board of Directors especially considering these examinations will focus on organizational board meetings and subsequent board meetings to measure how attentive to and involved board members are in the performance of their duties. These days common practice is to produce short and concise board minutes with perhaps one sentence, if that, dealing with each item presented to the Board.
The captive domiciles usually have a requirement that there be at least one Board of Directors meeting held each year and that it be held within the domicile. This requirement has led to the management of the captive sometimes viewing the annual board meeting as something that has to be gotten over with. Generic agendas are commonplace and quick action without discussion is likewise commonplace.
As a result, Boards and management miss opportunities to use the board meetings wisely including as a support mechanism for a board manual that board members can rely upon as an important aid to help them perform well as board members. Foresighted chief executive officers view the Board meeting as the best opportunity to review progress being made on many fronts and to display this information to the Board so that there can be intelligent comment, consensus and clearly worded recorded adopted resolutions showing a full board committed to continued pursuit of central matters. The board minutes as part of the board manual both record the history of and map the overall progress of the captive.
If asked as a board member to help organize the Board meetings and/or record the minutes of the Board of Directors meeting, always view the job as a serious responsibility. Weeks before the meeting begin the preparation of the proposed agenda so that all relevant items are included and make sure that the agenda and any relevant documents reflecting agenda items are distributed at an early date to the full board. Always make sure that any relevant item is included and review past minutes to determine if past items should be included in the upcoming Board agenda for update and follow up. Always attempt to add agenda items where the Board will learn how the company operates in keys areas and who has the responsibility to carry out the business plan in these key areas. For instance, it is important if a vice president of claims of a captive is hired that the Board is briefed on the fact and if possible, the Board have the opportunity to meet that key employee at a Board meeting.
The board manual should contain all minutes from all meetings in a chronological order. A board manual should be provided to each Board of Director member. The manual presents a history and a convenient means for Board members to trace the company’s progress and to prepare for each successive board meeting. It allows new board members to get up to speed in short order and to prepare themselves so they will be equipped with the background and knowledge of the company to be able to make solid contributions.
Granted, under this approach to conducting board meetings, agendas and minutes will become lengthy (not necessarily wordy). However, this is justified when one accepts the concept that well worded board minutes are a fundamental part of a truly important board manual that is the main tool for those who have ultimate responsibility for carrying out a captive’s agenda. Here the Board members can track progress on important issues such as resolution of regulatory audit concerns, success of new products or geographic areas and reinsurance coverage issues. From a regulatory and good governance point of view the board manual and minutes are the best evidence that a Board is committed to the overall success of the captive.
Another good innovation to encourage is the practice of sending a courtesy copy of the minutes to the regulator to become part of the company’s file in its domiciled state. Regulators seem to concur.
Compliments of John J. O’Brien JD, CLU, CPCU (lionsthree@aol.com)
Captive Insurance Company Independent Board of Directors Member