Cayman Islands Review Insurance Legislation

by Amanda Banks, Tax-News.com, London

14 July 2006

A report containing recommendations for changes to the Cayman Islands' insurance legislation has been released for comment by the industry.

The Cayman Islands Monetary Authority, which established the Insurance Law Review Working Group, submitted the report to the Government in early June.

The report contains 23 sets of recommendations for amendments to the law. These are designed to increase consumer protection, facilitate more in-depth supervision of some categories of licensees, attract new categories of international insurance business and provide more flexibility in structuring certain entities, among other things.

The recommendations include setting more precise provisions to enhance 'ring fencing' requirements applied to approved external insurers.

Ring fencing requirements were introduced in 1997 to ensure funds were available to meet the local liabilities of external insurers licensed to provide cover in Cayman.

Amendments would also introduce a new category of licence for reinsurers, explicitly exclude certain activities from the definition of insurance business and set new requirements for capital adequacy and solvency for all licensed insurers.

There are also recommendations for the introduction of a 'place of business' provision for brokers, and special provisions for insurers established as Segregated Portfolio Companies under the Companies Law.

The working group was set up by the CIMA Board in 2004 to review and make recommendations on the legislation, taking into consideration the particular business environment of the Cayman Islands and current international standards. The group comprised persons from the industry, selected for their knowledge and expertise in the insurance markets, and CIMA staff.

The team took into consideration the Core Principles of the International Association of Insurance Supervisors (IAIS), the recommendations of the IMF following its review of Cayman, the laws of several other jurisdictions, and the findings of CIMA's Insurance Task Force and the Review of the Domestic Insurance Industry Post Ivan.

The newly-published report represents the first comprehensive review of the insurance law since it was originally enacted in 1979. Managing Director of the Monetary Authority, Mrs Cindy Scotland, explained that while amendments had been made over the years on an as-needs basis, the law had not been reviewed as a whole for over 25 years.

"During that time insurance itself has evolved into very sophisticated and complex products in what is now an equally dynamic industry," she observed.

"A number of the recommendations reflect the existing operating practice of the Authority and placing them in the law would formalize that practice," Mrs Scotland concluded.

The deadline for comments on the report is 28 July. The document has been circulated to financial industry associations for comment and has also been made available to the media, and directly to the public via the Authority's website.

Recommended