In the early and middle 1990s the cost of Professional Indemnity Insurance cover available to Chartered Accountants had become increasingly burdensome. As a result the South Africa Institute of Chartered Accountants (“SAICA”) initiated a project to offer SAICA members Professional Indemnity insurance cover that would recognise the nature of the exposure covered relative to the inherent risks. The ultimate intention was to provide cover at cost, in contrast to the conventional market which was not willing to do so.
In 1996 the Chartered Accountants Professional Indemnity Mutual (CAPIM) was formed as a company not for gain to act as co-ordinator for the implementation of the Professional Indemnity Insurance scheme, which was initially known as SA Eagle Risk Financing Professional Indemnity Group Scheme. Subsequently, in 2009, SA Eagle was replaced by Guardrisk Insurance Company Limited.
CAPIM facilitated the arrangement whereby the insurer would be the risk carrier and the service provider would cater for all underwriting, accounting, administration, and reinsurance requirements.
In a structural change in 2005 a new company was formed, CAPIM (Pty) Ltd, which took over the operations of the original Section 21 Company. The shareholder of CAPIM (Pty) Ltd is the CAPIM Policy Holders Trust, which is administered by 3 trustees, and the beneficiaries of the Trust are the current policyholders.
The success of the scheme centred around access to investment earnings and underwriting profits and control of the costs of reinsurance. This was achieved by arranging for Guardrisk Insurance Company Limited to provide the Insurance licence necessary to issue policies to members of SAICA, in terms of the requirements of the Insurance Act. The arrangement is structured through a Guardrisk capitalised cell captive facility.
Guardrisk are responsible for ensuring that all legitimate claims are settled and as such they require that reinsurance arrangements are adequate and sufficient to protect their liability and thereby ensure the long term survival of the scheme.
The arrangement therefore means that the surplus is legally owned by Guardrisk. This is necessary in terms of the insurance act and policyholder’s rules. Since these funds are not owned by CAPIM the agreement with Guardrisk is arranged in a manner ensuring that any surplus emanating from the scheme will be used for one purpose only and that is to provide benefit to policyholders.
Such benefits can be provided either as a return of surpluses, from Guardrisk to policyholders, or used to reduce the pressure to increase rates or a combination of both, as determined and agreed by CAPIM from time to time in consultation with the service provider.
In essence, CAPIM’s role is behind the scenes, acting in the interests of the schemes policyholders, ensuring amongst others things that all claims made against policyholders are defended in their best interests. Hence our logo “Protecting the reputation of Chartered Accountants”.