Deadlines are looming in the next few days for comments on various corporate governance proposals that the Cayman Islands Monetary Authority is preparing to make in line with changes in international policy.

* There is a draft rule that proposes to impose corporate governance on insurers. The International Association of Insurance Supervisors' core principle 7 states that regulators ought to be able to require insurers to establish and implement corporate governance 'frameworks' that ensure that their businesses are managed soundly and prudently and adequately recognizes and protects the interests of policyholders.

In line with this, s8(2)(g) Insurance Law 2010 says that an insurer should “maintain an effective system of governance as approved by the Authority”. However, CIMA has not indicated what it considers to be an appropriate and effective system of governance. Unlike many core principles promulgated by IOSCO and the Basel Committee on Banking Supervision, those of the IAIS require 'enforceability,' hence the need for a formal regualtory rule.

The new rule will apply to every insurer (class A external insurers excepted) and ought to contain:

• an enforceable corporate governance standard;    
• clearly defined jobs for the board, senior management and key persons in control functions;
• rules to do with numbers and mixtures of people, skill and expertise;
• a code of conduct for individual members of the board, perhaps saying that they ought to act in good faith, exercise independent judgment, avoid using their positions for their own personal gain, etc.;
• risk management and internal control oversight;
• a remuneration policy for those at the top;
• reliable financial reporting processes;
• systems and controls to promote regular communications between the licensee, CIMA and others;
• the duties of senior managers; and
• a duty for the insurer to show CIMA that it is doing all this properly.

CIMA's managing director must receive representations on this by 5:00PM on 14 September, although the consultation section of the CIMA website lists the 18th as the right deadline.

* There is also a draft statement of guidance on Corporate Governance for all regulated entities (excluding regulated mutual funds and licensed insurers) to replace the existing one. This is in line with Basel Committee for Banking Supervision core principle 14 (updated 2012).

The CIMA paper on this refers to a famous local case by stating, somewhat clumsily: "The Weavering Macro Fixed Income Fund Limited (In Liquidation) vs Stefan Peterson and Hans Ekstrom case in August 2011 intensified the spotlight on the Cayman Islands’ corporate governance framework. The Grand Court of the Cayman Islands imposed a US$111 million restitution order as the fund’s loss caused by willful neglect or default of both directors [although] this decision was overturned by the Cayman Islands Court of Appeal in February 2015 [which] disagreed with the finding of the directors breach of duty as 'willful neglect or default.'"

The proposed statement of guidance aims to satisfy CIMA’s regulatory functions as stipulated in s6(3)(a) Monetary Authority Law. In every case, it calls for:

• more duties and responsibilities for the board;
• an expansion on the knowledge and competence of directors;
• more elaborate duties for individual directors, forcing them to pursue the best interest of the company;
• guidance for the management of conflicts of interest;
• some rules to govern recordkeeping from a corporate governance perspective involving meeting agendas, minutes and other things;
• guidance for the delegation of duties;
• rules for disclosures to CIMA; and
• more rules to do with risk appetite and strategic risk management.

This, too, contains a deadline of 14th September while the CIMA site says the 18th.