Insurance Law 2010 - Enhancing Cayman as a Leading Domicile for Insurance Products
With the intention of reinforcing its position as a leading insurance and alternative risk transfer domicile, the Cayman Islands legislature has recently enacted the Insurance Law, 2010 (the “Law”). Although formally enacted, the Law will only come into effect once the associated regulations have been finalised and brought into force. This is currently anticipated to occur towards the end of the first quarter of 2011.
The Law brings about a number of changes to the regulatory regime covering matters such as categories of licence, the obligations of licensees, and the power and duties of the Cayman Islands Monetary Authority ("CIMA"). While providing for increased regulatory transparency for existing and prospective licensees, the Law also provides for greater streamlining in the regulation of licensed entities.
Insurers carrying on domestic business in Cayman will continue to be licensed as Class A insurers, but for captive insurers there will now be three categories of licence, Class B(i), Class B(ii) or Class B(iii), depending on the extent to which net premiums written originate from related business of the insurer.
Of particular significance to structurers of insurance-risk securitisation products is the introduction of a new category of insurance licence (the Class C licence) for the benefit of streamlining applications by 'cat-bond insurers' or 'special purpose insurers'. To qualify for this licence and in keeping with current market practice, such insurers' liabilities and capital arrangements must be structured on a limited recourse ‘fully funded’ basis. The creation of this category of licence means there will now be distinct licence application and supervisory regimes for such licensees, which in turn is expected to enhance access to Cayman for these products. CIMA is expected to continue to apply most of the regulatory standards of the current cat-bond/special purpose insurer regime to future Class C licensees.
In keeping with the need to streamline the licensing and supervisory process, and to reflect increasing interest in Cayman as a reinsurance domicile, a new category of insurance licence (the Class D licence) has been established for the carrying on of reinsurance business.