• CAPI Chapter 4 CAPI Chapter 4 Outsourcing managerial functions

    • CAPI 4.1.1 Application of chapter 4

      This part applies to the outsourcing of the managerial functions of a firm that is a QFC captive insurer.

      Note 1 The management of a firm may be exercised by—

      (a) the firm itself; or
      (b) a captive insurance manager under an outsourcing agreement.

      Note 2 For outsourcing of other matters by QFC captive insurers, see CTRL, Chapter 8.

      Amended by QFCRA RM/2012-5 (as from 1st July 2013).
      Amended by QFCRA RM/2021-1 (as from 1st July 2021)

    • CAPI 4.1.2 Outsourcing of firm's management

      (1) A firm may outsource its managerial functions to a captive insurance manager.
      (2) A firm that outsources its managerial functions to a captive insurance manager may apply to the Regulatory Authority for approval of an employee or employees of the captive insurance manager to exercise 1 or more of the following controlled functions:—
      (a) senior executive function;
      (b) MLRO function;
      (c) compliance oversight function;
      (d) finance function.

      Note Senior executive function, MLRO function, compliance oversight function and finance function are defined in the glossary.
      Note 1 A firm that outsources its managerial functions to a captive insurance manager may choose to use—
      (a) its own employees to exercise controlled functions for the firm; or
      (b) the employees of the captive insurance manager to whom the firm has outsourced its managerial functions.
      Note 2 For the rules on the assessment of individuals to exercise controlled functions and related matters, see INDI, Chapter 3 (Controlled functions), and Chapter 5 (Training and competency). Certain personnel-related decisions about individuals appointed or to be appointed to certain controlled functions must be made by or after consultation with an authorised firm's governing body — see INDI, rule 3.1.2, and CTRL, rule 3.1.15.
      Amended by QFCRA RM/2014-6 (as from 1st January 2015)
      Amended by QFCRA RM/2021-1 (as from 1st July 2021)

    • CAPI 4.1.3 Selecting captive insurance manager and entering into agreement

      (1) A firm must exercise due skill, care and diligence in selecting a captive insurance manager and in entering into, managing and terminating an outsourcing agreement.
      (2) In making a decision for subrule (1), the firm must have regard to—
      (a) the ability and capacity of a captive insurance manager to exercise the outsourced activity or functions reliably and professionally at the start and during the life cycle of the outsourcing agreement; and
      (b) whether the captive insurance manager has adequate resources (including employees, information technology, office space and equipment) to provide the services requested; and
      (c) potential conflicts of interest that may arise from the provision of the service by the captive insurance manager; and
      (d) the financial stability and expertise of the captive insurance manager; and
      (e) any other relevant factors.
      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 4.1.4 Outsourcing agreement must be in writing etc

      (1) An outsourcing agreement to which this part applies must be in writing.
      (2) An outsourcing agreement must include—
      (a) a description of the activity and functions being outsourced; and
      (b) provisions giving the Regulatory Authority, the firm and the firm's internal auditors, external auditors or actuaries access to books, records and data belonging to the firm that may be in the possession or control of the captive insurance manager; and
      (c) the obligation for parties to protect confidential information and personal data; and
      (d) the termination rights of each party.
      (3) A firm must give the Regulatory Authority a copy of an outsourcing agreement within 5 business days after the day the agreement is signed by the parties.

      Note Business day is defined in the glossary.
      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 4.1.5 Certain events to be notified to the Regulatory Authority

      (1) This rule applies if—
      (a) a firm has an outsourcing agreement with a captive insurance manager (the old agreement); and
      (b) either—
      (i) the captive insurance manager becomes insolvent; or
      (ii) the captive insurance manager ceases to be authorised in the QFC; or
      (iii) the old agreement is terminated or otherwise ceases.

      Example

      a firm may decide to terminate an outsourcing agreement because it wants to manage itself
      (2) A firm must immediately tell the Regulatory Authority, in writing, about the occurrence of any of the matters in subrule (1) (b).

      Note Writing is defined in the glossary.
      (3) Unless a firm decides to manage itself, the firm must select another captive insurance manager and enter into a new outsourcing agreement with the new captive insurance manager—
      (a) before the old agreement ceases; or
      (b) if the old agreement has ceased—as soon as possible after the date the old agreement ceased.
      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 4.1.6 Effect of outsourcing

      (1) Despite anything in this chapter, the outsourcing of an activity or function does not relieve the firm from any regulatory obligations in relation to the outsourced activity or function.
      (2) The firm, and its senior management, remain responsible for ensuring that—
      (a) all QFC regulatory requirements are complied with in relation to the outsourced activity and function; and
      (b) the outsourced activity or function is otherwise properly exercised.

      Note Function and exercise are defined in the glossary.
      Derived from QFCRA RM/2011-1 (as from 1st July 2011)