The insurance industry in the Cayman Islands is regulated by the Cayman Monetary Regulatory Authority International through the issuance and amendment of Rules, Statements 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 Act. 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 modeling agency, such as RMS or Eqecat. The minimum standard for a model is that it must include windstorm and earthquake risks, provide for a 1-in-100-year return period, and reflect both the Gross and Net probable maximum loss.

This method applies a flat 30% factor to the gross aggregate exposure (net of sums reinsured) per event. Additionally, it requires an assessment of the probable maximum loss, including at least one reinstatement.

Refer to the Insurance Statistics.

There are two options for the catastrophe component: 1. Default method; 2. Internal Model Method.

The solvency regulations are generally straightforward, factor-based requirements assessed against assets, liabilities, subsidiaries, and foreign exchange risk. Catastrophe risk is assessed differently and will be monitored quarterly, along with the filing of quarterly accounts.

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

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

There are several important changes affecting Class A insurers, most notably in the areas of capital and solvency, reporting and public disclosure, change of control, and penalties for non-compliance. It is essential for a Class A insurer, whether locally incorporated or external, to obtain a copy of the Insurance Act, 2010, and the relevant regulations, and review the new requirements.

If an insurer does not apply within this 18-month timeframe, its existing license will expire, it will lose its licensing status, and it will no longer be authorized to conduct insurance business.

Yes, there is an 18-month period starting from November 1, 2012, allowing existing licensees to comply with the new Law and its supporting Regulations. Full compliance with The Insurance Law, 2010 is required by April 30, 2014. Upon approval by the Cayman Monetary Regulatory Authority International, the Class A insurer will be considered validly relicensed.

The main benefits of incorporating segregated portfolios within the same captive include:

(a) Clear separate legal personality, which includes the privileges of a company and a certificate of registration;

(b) The ability to appoint a Board of Directors that can differ from the SPC;

(c) The ability to contract with other PICs within an SPC structure.

PIC legislation now permits 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), which was implemented 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 the subcategory of Class B Insurer, there may be additional Prescribed Capital Requirements (PCR) based on the amount of unrelated business. The MCR ensures sufficient capital to cover any technical provisions. Additionally, under certain conditions, Cmrai may recognize equity built into prudently valued technical provisions, which will be factored into determining each Class B insurer’s prescribed capital requirement (PCR).

Class B(i) insurers can write up to 5% of Unrelated Business without impact. If the business is part of a common risk management plan, it will not be classified as Unrelated Business. However, if the Unrelated Business does not meet these criteria, it is advisable to consult with your Insurance Manager and the Cayman Monetary Regulatory Authority International.

“Related Business” refers to business that originates from the insurer’s members or the members of any group related through common ownership, a common risk management plan, or as determined by the Authority.

The most notable change for captives is the removal of the distinction between restricted and unrestricted sub-divisions under the Class B licence. Now, the Class B licence is categorized into Class B(i), Class B(ii), and Class B(iii), based on the percentage of related business that the captive writes.

Yes, the new Law introduces several provisions affecting Class A insurers that must be addressed during the transition phase. Key areas include:

• Expanded Reporting Requirements;
• Mandatory Public Disclosure of Financial Statements;
• Increased threshold for change of control to 10%;
• Requirement to obtain Cmrai approval for any changes to business plans;
• Necessity for effective governance and risk management systems suited to the company’s size, nature, and scale, including a requirement for local Class A insurers to have at least two directors;
• Penalties for late filing of annual fees;
• Higher fines and penalties for non-compliance;
• New Monetary Authority Sundry Fee schedule.

During the transition period, Cmrai will require all Class A insurers to calculate their Minimum Capital Requirement (MCR) and Prescribed Capital Requirement (PCR) using both the default and internal model methods. This process will help the domestic insurance industry present data that allows for better calibration of the underlying factors, thereby improving the correlation between risk and capital.

Shareholders

Cmrai requires due diligence on the ultimate shareholder of the licensee, except when shares are held by a company listed on a recognized exchange.

Shareholders who own 10% or more at the time of licensing or afterward must submit full due diligence documentation/information for approval. Shareholders owning less than 10% need to provide their name and physical address.

For licensees whose shares are held by a public company, Cmrai requires the following:
1. Two years of audited financial statements.
2. For any company owning 10% or more of the public company, two 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 where the applicant has been a customer for at least two years.
   3. Two independent character references.
   4. Notarized Affidavit or Police Clearance Certificate.
   5. Notarized Statement of Net Worth (not required of the Trustee).

4. Prescribed fee for changes in Shareholder after licensing.

For privately owned licensees, Cmrai requires due diligence on shareholders, or if a trust structure is involved, on the beneficiaries and Trustee. The following documentation is required:
1. Personal Questionnaire (PQ)
2. Financial Reference from a recognized financial institution where the applicant has been a customer for at least two years.
3. Two independent character references.
4. Notarized Affidavit or Police Clearance Certificate.
5. Notarized Statement of Net Worth (not required of the Trustee).
6. Prescribed fee for changes in Shareholder after licensing.
 

Directors/Officers

Documentation/information required at the time of licensing and afterward:
1. Personal Questionnaire (PQ)
2. Financial Reference from a recognized financial institution where the applicant has been a customer for at least two years.
3. Two independent character references.
4. Notarized Affidavit or Police Clearance Certificate.
5. Prescribed fee for the appointment of Directors and Senior Officers.

The Companies Law allows for the provision of migration.

While there are no special categories for captives, the Segregated Portfolio Companies Legislation provides a structure for Rent-A-Captives.

For up-to-date statistics on the insurance industry, please click the following link: Insurance Statistics and Regulated Entities.

The Cayman Islands do not impose income, capital gains, or corporate taxes.

Yes, the Cayman Monetary Regulatory Authority International mandates annual audits for captives.

Cmrai requires an annual return submission. For details, refer to the "Reporting Requirements and Schedule" section.

The regulatory authority overseeing the financial industry in the Cayman Islands, including captives, is the Cayman Monetary Regulatory Authority International.