Report on the 2019 Thematic Review of Insurer Cash Management and Control of Funds (February 2020)

Summary

This is a thematic review report published by the Guernsey Financial Services Commission summarising findings from its 2019 review of cash management and control of funds among Licensed Insurers. It is informational and advisory in nature, sharing good practice and areas for improvement identified from a sample of 12 low impact Licensed Insurers, rather than creating new binding rules.

• Scope of review: Covered signing authorities, payment processes, banking services, payment instructions, management information, outsourcing, loans to third parties, and reporting to the Commission.
• Existing legal basis: Reiterates existing obligations under the Insurance Business (Bailiwick of Guernsey) Law 2002, the Principles of Conduct of Finance Business, the Finance Sector Code of Corporate Governance, and the Guidance Note on Outsourcing, rather than introducing new requirements.
• Good practice highlighted: Examples include segregation of duties in payment approval, electronic systems preventing one person from both creating and approving payments, regular bank reconciliations, and monitoring of outsourced third parties handling funds.
• Areas for improvement: Commission flags inconsistent signatory list review frequency, gaps in bank reconciliations exceeding three months, breaches not logged promptly on breach registers, and insurers lacking internal audit or independent testing of policies (noted as a breach of Principle A:15 of the Finance Sector Code of Corporate Governance).
• General Representatives reminder: The Commission reminds General Representatives of their duty under the Insurance Business (Duties of General Representatives) Regulations 2008 to report to the Commission on compliance with relevant legislation.

The Commission encourages all Licensed Insurers, including those in run off, to read the findings and satisfy themselves that their own cash management and payment control arrangements reflect the good practice identified, though the report itself does not impose new formal deadlines or mandatory actions beyond existing legal and regulatory requirements.

Key obligations

• Licensed Insurers should maintain adequate liquidity and adequate systems of control as required by Schedule 7 of the Insurance Business (Bailiwick of Guernsey) Law 2002.
• Licensed Insurers should operate effective systems of control with Board oversight, including over outsourced functions, per Appendix 3 of the Finance Sector Code of Corporate Governance.
• Licensed Insurers should ensure sufficient internal audit or independent testing of cash management policies and procedures, in line with Principle A:15 of the Finance Sector Code of Corporate Governance.
• General Representatives must report to the Commission on compliance with relevant legislation under the Insurance Business (Duties of General Representatives) Regulations 2008.
• Licensed Insurers should deal with the Commission in an open and cooperative manner and promptly disclose matters that might reasonably be expected to be disclosed, per Principle 10 of the Principles of Conduct of Finance Business.
• Boards should ensure signing authority approvals and reviews are properly documented and follow internal policies consistently.
• Breaches of cash management policies and controls should be logged on a breach register and reported to the Board and the Commission in a timely manner.

Applies to

Licensed Insurers, Insurance Managers, General Representatives