The Cayman Islands Insurance Act, 2010 (the Law) as amended came into force on 1 November 2012. The Law, derived from significant public and private sector consultation, represents a comprehensive modernization of the prior Insurance Law in alignment with international standards. Principally, the Law strengthens the regulatory powers of the Cayman Islands Monetary Authority (CIMA), enhances protection for policyholders in Cayman's domestic market and facilitates Cayman's further development of reinsurance and insurance linked securities (ILS) business. The practical impact of the new Law on the captive insurance industry will not be significant because many of the new provisions simply introduce into law existing practice of CIMA that was not previously enshrined in legislation. 

The Insurance industry in the Cayman Islands is regulated by the Cayman Islands Monetary Authority through the issuance or amendments of Rules, Statement of Guidance and Statements of Principle. Click here to review the various regulatory measures. 

Any organization that was, or plans to be, licensed under the Insurance Law. This includes:  

• Captives;
• Commercial Insurers;
• Insurance Linked-Securities;
• Reinsurance Companies;
• Insurance Brokers;
• Insurance Agents;
• Insurance Managers

This method allows the insurer to use the model of a recognized catastrophe modelling agency e.g. RMS, Eqecat, etc. However, the minimum standard for a model is that it must contain windstorm and earthquake risk, provide for a 1/100 year return period and must reflect both the Gross and Net probable maximum loss. 

In essence, this is a per event risk retention method which imposes a flat 30% factor to the gross aggregate exposure (net of sums reinsured); Additionally, this requires an assessment of the probable maximum loss and must include at least one reinstatement. 

Refer to the Insurance Statistics.

Essentially, there are two choices with respect to the catastrophe component: 1. Default method; 2. Internal Model Method. 

The solvency regulations are, in the main, simple factor based requirements assessed against assets, liabilities, subsidiaries and foreign exchange risk. Catastrophe risk is assessed against a different system and will be monitored on a quarterly basis alongside the filing of quarterly accounts. 

Yes, depending on the whether the license is an External Class A or a Locally Incorporated Class A, the Prescribed Capital Requirement for insurance business will be:

• Local Class A 125% of MCR;
• External Class A 150% of MCR

There are a number of changes that effect a Class A insurer, the most significant of which are in the areas of capital and solvency, reporting and public disclosure, change of control and penalties for non-compliance. Overall, it is incumbent upon a Class A insurer, whether locally incorporated or external, to obtain a copy of the Insurance Law, 2010 and the supporting regulations and review the new requirements. 

If an insurer fails to make an application during this 18 month period, its old licence will expire, it will cease to be licensed and it will no longer be able to conduct insurance business. 

Yes, there will be a period of 18 months from 1 November 2012 which will allow existing licensees to come into compliance with provisions of the new Law and supporting Regulations. Therefore, full compliance with The Insurance Law, 2010 is required no later than 30 April 2014. Upon approval by the Cayman Island Monetary Authority, the Class A insurer will be deemed validly relicensed. 

The particular advantages of being able to incorporate segregated portfolios are the capacity for segregated

portfolios within the same captive to have a:

(a) clear separate legal personality: which allows for all the privileges of a company including a certificate of registration; 

(b) appoint a Board of Directors which can differ from the SPC;

(c) contract with other PICs within an SPC formation.

PIC legislation now allows for a segregated portfolio company to incorporate one or more of its segregated portfolios. Click the following link to view the Insurance (Portfolio Insurance Companies) Regulations, 2015. 

The Insurance (Amendment) Law, 2013 introduced the concept of Portfolio Companies (“PICs”) and was rolled out in March 2013. 

• Class B(i): $100,000 - $200,000
• Class B(ii): $150,000 - $300,000 
• Class B(iii): $200,000 - $400,000

Yes, depending on subcategory of Class B Insurer, there may be new Prescribed Capital Requirements

(“PCR”) which will be strictly based on the amount of unrelated business, if any. The purpose of the MCR is the minimum capital required to run off any technical provisions. Furthermore, under certain circumstances, CIMA will also recognize equity built into prudently valued technical provisions, and which will be factored into determining each Class B insurer’s prescribed capital requirement ("PCR"). 

First of all, all Class B(i) insurers are allowed to write up to 5% of Unrelated Business with no impact. Further, if business falls under a common risk management plan, this will not be treated as Unrelated Business. However, if Unrelated Business does not fall into any of these categories, you may wish to discuss the matter with your Insurance Manager and the Cayman Island Monetary Authority.

“Related Business” means business which will originate from the insurer’s members or the members of any group with which it is related through common ownership or a common risk management plan, or as determined by the Authority. 

The most significant change for captives is the fact that the Class B licence is no longer divided into restricted and unrestricted sub-divisions. That distinction has been eliminated. Instead, a Class B licence is now sub-divided into a Class B(i), a Class B(ii) and a Class B(iii) . Which sub-class applies depends upon the percentage of related business that the captive writes. 

Yes, there are many provisions in the new Law which will affect Class A insurers and it is important that you address these matters during the transition phase. A summary of these include, where applicable:

• Comprehensive New Reporting Requirements;
• Requirement for Public Disclosure of Financial Statements;
• Threshold for a change of control has been raised to 10%;
• Mandate to gain CIMA approval for any business plan changes;
• Requirement to have effective governance risk management systems appropriate to the size, nature and scale of your
• business; this includes the requirement for local Class A’s to have a minimum of two directors;
• Penalties for late filing of annual fees;
• Increases in fines and penalties for non-compliance;
• New Monetary Authority Sundry Fee schedule

During the transition phase, CIMA will require all Class A insurers to calculate their MCR and PCR on both the default and internal model method in the first instance. This process will allow the domestic insurance industry to present data that will allow for calibration of the underlying factors and therefore, a more effective correlation between risk and capital. 

Shareholders

CIMA requires that due diligence on the ultimate shareholder of the licensee be conducted, except where the shares are held by a company traded on a recognized exchange. 

Shareholders of the licensee who will own 10% or more at the time of licensing and after licensing are required to submit full due diligence documentation/ information for approval.   Shareholders of the licensee who will own less than 10% at the time of licensing and after licensing, are required to submit their name and physical address.

Where the shares of the licensee are held by a public company, CIMA requires the following information:
1. Two (2) years of audited financial statements.
2. For any company owning 10% or more of the public company two (2) years of audited financial statements.
3. For any individual owning 10% or more of the public company:

   1. Personal Questionnaire (PQ)
   2. Financial Reference- from a recognized financial institution in which the applicant has been a customer for at least 2 years and has maintained his/her accounts in a satisfactory manner.
   3. Two independent character references
   4. Notarized Affidavit or Police Clearance Certificate.
   5. Notarized Statement of Net worth (this is not required of the Trustee)

4. Prescribed fee for change in Shareholder subsequent to licensing.

Where the shares of the licensee are privately owned, CIMA requires the following information regarding the shareholder(s). Or, where a trust structure is involved, due diligence regarding the beneficiaries and Trustee of the trust must be carried out and the following information is required:
1. Personal Questionnaire (PQ)
2. Financial Reference- from a recognized financial institution in which the applicant has been a customer for at least 2 years and has maintained his/her accounts in a satisfactory manner.
3. Two independent character references
4. Notarized Affidavit or Police Clearance Certificate.
5. Notarized Statement of Net worth (this is not required of the Trustee)
6. Prescribed fee for change in Shareholder subsequent licensing. 
 

Directors/ Officers

Documentation/ information required at the time licensing and after licensing.
1. Personal Questionnaire (PQ)
2. Financial Reference- from a recognized financial institution in which the applicant has been a customer for at least 2 years and has maintained his/her accounts in a satisfactory manner.
3. Two independent character references
4. Notarized Affidavit or Police Clearance Certificate.
5. Prescribed fee for  the appointment of Directors and Senior Officers.

Provision is made for migration under the Companies Law.

There is no provision for special categories of captives but the Segregated Portfolio Companies Legislation provides a framework for Rent-A-Captives.

For current statistics on the insurance industry please click on the following link: Insurance Statistics and Regulated Entities.

No income, capital gains or corporation taxes are payable in the Cayman Islands.

The Cayman Islands Monetary Authority does require annual audits from captives.

CIMA requires an annual return to be submitted. Please refer to "Reporting Requirements and Schedule" Section.

The regulatory authority for the Islands' financial industry, captives included, is the Cayman Islands Monetary Authority.