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The Insurance Law – As it applies to Captives
The Law
The business of insurance and reinsurance companies, insurance managers as well as agents and brokers, is regulated by the terms of the Insurance Law (2004 Revision) (‘the Law’). The Law requires that no insurance, or insurance related business, as defined in the Law, may be conducted in the Cayman Islands other than by the holder of a valid licence issued by the Governor in Council.
Licence
Three categories of licence are available to insurance and reinsurance companies:
- A Class ‘A’ Licence permits the holder to engage in domestic insurance.
- A Class ‘B’ Unrestricted Licence permits the holder to carry on business, other than domestic business, from within the Cayman Islands.
- A Class ‘B’ Restricted Licence permits the holder to carry on business outside the Cayman Islands with its shareholders or such other persons as may be specifically approved by the Governor.
Net Worth
The comments that follow apply to Class ‘B’ Licences, both Restricted or Unrestricted. For the latter category of licence the Law prescribes the following minimum net worth requirements:
- Companies writing short term general business (property and casualty) -CI$100,000 (US$120,000)
- Companies writing long term business (usually life business) -CI$200,000 (US$240,000)
- Companies writing both short and long term business -CI$300,000 (US$360,000)
There are no specific minimum net worth requirements for Restricted Class ‘B’ Licences.
Application Form and Fees
Licence applications must be submitted on Form 2, as detailed in the Insurance (Forms) (Amendment) (Licence Applications) Regulations, 2001. A licence fee of CI $7,000 (US $8,536.59) is payable on filing the Licence Application and then by 15th January in each calendar year.
Statutory Requirements
The Law is designed to regulate the activities of each licensee while providing a flexible framework within which a licensee can operate. Full corporate and accounting records must be maintained in the Cayman Islands unless dispensation is received from the Head of Insurance Supervision. An independent audit is required each year and copies of the accounts must be filed with the Head of Insurance Supervision within six months of the financial year end. An annual statement of operations must be filed by the insurance Manager on the licensee's behalf by January 15th, each year.
The Law empowers the Authority to exempt an insurer from any provision of the Law, to establish capital, liquidity margins and ratios and generally to impose upon licensees such other requirements as he considers are necessary.
