Insurance supervisors, traditionally, spend the majority of their professional careers in regulatory work. This tradition can no longer be said to apply to insurance supervision in the Cayman Islands, where peripatetic insurance professional William McCullough was followed into the position of head of insurance supervision in January 2000 by seasoned risk management consultant Clive Thursby.
So what attracted a career market professional to switch to supervision?
“I made the application without really expecting that someone of my background was the person they had in mind,” Thursby says frankly, “they” being the Cayman Islands Monetary Authority. Another tradition - stuffy insurance supervisors who rarely speak their minds - also no longer applies in Cayman.
“Obviously I knew that Cayman was a large captive centre,” Thursby says. “I had been dealing with captives around the world for 25 years. I had been involved with more esoteric risk financing structures ... and it seemed like an interesting chance to obtain a ringside seat in the development of new ways of doing things.” He admits that he also had “certain bees in my bonnet about how the captive market worked,” and was attracted to a position in which he might have some influence over the way in which services were provided to captives.
Interviewed in London and offered the post, Thursby had never been to Cayman, so he paid a visit, met the people he would work with and liked what he saw.
“I felt comfortable with what was in place, but relished the prospect of the structural work that was still needed,” he says. “I liked the challenge of developing the regulatory function and making it more accessible at times when captive solutions were, and are, coming under greater scrutiny as to whether they deliver value. It is important that the regulator understands the business dynamics. I also saw an opportunity to raise standards a little in terms of the degree to which we get involved in assessing captive propositions.”
In the months since he took up the post, Thursby has increased the department's staff from six to ten. “We were under-resourced when I got here, because of the increased workload in terms of pure numbers of cases to be attended to, but also because we have been expanding the scope of the regulatory function, partly in response to international encouragement,” he says.
Thursby was well aware of the international initiatives bearing down on the offshore world when he took the job. “The department had been doing the things which international standards say we should have been doing; we're just trying to do them a bit more thoroughly these days,” he says. “I had anticipated that and it was one more reason I found the position an exciting possibility.”
He has given considerable thought about how best to do the job and to ensure that those who deal with the department understand its thinking. “We have been trying to improve the quality and flow of information throughout the system,” he says. “Insurance is notoriously bad at moving information, so sometimes it feels as if we are swimming against the tide. We're trying to ensure that everyone is making decisions on an informed basis and to make it easier for managers to understand our thought processes, for example by issuing guidelines on such matters as how much capital an insurance company should have.”
Cayman law is relatively unprescriptive in regards to capital. “That has, perhaps, been a strong selling point,” Thursby admits, “but it has given rise to a little uncertainty. We like to judge everything on an individual basis, but would also like to be a little more transparent on how we come to decisions.”
Although Cayman's insurance industry is largely international in nature, the islands have a surprisingly large domestic market, with annual premiums of about $100m generated by an estimated population of 45,000 people, using 29 insurers. Thursby believes the domestic market requires greater regulatory attention. “In the nature of things, it is less glamorous than the captive side but the consequences of things going wrong can be more serious,” he notes.
A market man
Clive Thursby was born in Wiltshire, England in January 1950, the son of a professional soldier. He earned a BA in Applied Economics and a BA (Hons) with first class honours in Economic History from Victoria University of Wellington, New Zealand, which he attended on a Commonwealth Scholarship.
Back in England, he joined Dawnay Day & Co, a merchant bank. “It was all very exciting,” he says of his early days, “but my timing was impeccably wrong. When the secondary banking market crash came [in the mid-1970s], a lot of smaller players found themselves high and dry.” He moved on to the treasury function at the Lewis & Peat Group, a commodity trading house.
“Like all impatient young men,” - he was by now 26 - “I got itchy feet,” Thursby recalls. “The company wanted to retain me, and had a sister insurance operation called Fenchurch, a Lloyd's broking firm. I was seconded to Fenchurch to undertake a risk management review of all the European operations of General Motors.” The consulting exercise lasted over a year and was followed by a range of risk financing work and risk management consulting. The die was cast, at least for the next quarter of a century.
From Fenchurch, Thursby joined the CE Heath Group as director of risk management in support of the company's international retail broking activities. Then a “palace revolution” at Heath, a reverse takeover by Fielding & Partners, brought a different perspective of what the broker's role was.
“So I moved on to KPMG, where I set up the risk management consulting function in 1987,” Thursby recounts. “It was a most enjoyable period of my life. After the deal-making of the insurance market, the more cerebral activity of consultants in a professional environment was quite refreshing. The idea was that we would harness the audit client base to offer risk management advisory services, but it proved difficult to make happen. Instead, I developed from scratch an open market portfolio of business, which I did for six years.”
He undertook a wide range of risk management and consulting assignments, mostly in the UK, but also around the world. “I guess I could have happily stayed there for the rest of my life, but I was approached by CT Bowring to take on the role of head of risk financing in London,” Thursby says. “The position had a considerable European dimension to it. I was the top risk financing advisor for Marsh outside North America, with a strong team of people.”
The merger with J&H led Thursby to the job market once again, and a short tenure with Tillinghast, before he struck out on his own as an independent consultant, certain that he could make it work but uncertain as to whether or not that was what he wanted to do. “It was proving viable, but I missed the camaraderie of working in a project team and the benefits of bouncing ideas off people,” he says. By chance, he saw an advertisement for the forthcoming vacancy in the Cayman Islands. Thursby says he is thriving in the position.
Now that he has settled in Cayman, with the best part of a year's experience in the position under his belt, what surprises has the job held?
“I suppose that, relative to my primarily European experience of captive activities, I have been surprised by the degree of interest evidenced by the senior management of captive owners. Some really quite big hitters get involved in what their captives are doing and how they are performing,” Thursby says. “In the European arena, captives are still often seen as risk managers' playthings, rather than having much visibility on senior management's agenda.
“I would also have to say that I have been somewhat surprised by the relatively small number of insurance people in Cayman - fewer than I had expected or experienced elsewhere. I have also been surprised by the rate at which captive manager appointments change. Maybe that has to do with the North American mentality of hiring and firing.”
Not surprising - at least yet - has been the impact of e-commerce. “Like anywhere these days, Cayman has ambitions about attracting e-business, and things are happening in that area,” Thursby says. “Insurance, of course, has always been an industry that is notoriously slow to embrace new technology, but it has no choice now or it will find its turf invaded by other financial service providers.
“If I were the regulator of a large and sophisticated insurance market, I would be concerned about the implications of these developments for its effective supervision. Cayman's domestic market is small, which brings its own worries, but not those. As far as the international sector is concerned, the type of business we mostly see (larger commercial and professional risks and annuity products) is not considered by most analysts as being suitable for internet trading because of its complexity and its advisory element.”
He makes one qualification to that judgment: “ ... the possibility of internet risk exchanges as an alternative to reinsurance or third party underwriting. I can remember talking to a captive about risk swaps back in the 1970s, before I had even heard of portfolio theory, but the idea did not take root. Now it could work, although it probably requires the enthusiastic support of the big brokers to make any impression,” he says.
“Where the internet can score for us is by improving the flow of information, where general market practice is still appalling.
The main constraint on the development of risk management as a business discipline is the inferior quality and circulation of information. That impacts the role of captives. Let us hope the solution technology now offers will be fully grasped,” Thursby says.
The internet is not the only agent for change affecting the Cayman Islands in the year 2000. Clive Thursby's open style and his wide-ranging hands-on experience of the industry whose Cayman activities he now supervises will ensure that there will be no bureaucratic barriers behind which regulators have traditionally hidden. As Cayman reinforces its place on the A-list of offshore jurisdictions, Thursby and his vision of open regulation will be major players.