Cayman Enacts Regulations Affecting Portfolio Insurance Companies

February 2, 2015

The Cayman Islands passed new insurance regulations on January 16, which affect portfolio insurance companies (PIC).

These regulations are designed to provide more risk management alternatives for insurers incorporated as segregated portfolio companies (SPCs), creating more flexibility for their operation, according to the Insurance Managers Association of Cayman (IMAC)*.

Operating within the fundamental principles of corporate law, based on English Common Law, this legislation is considered more robust than the incorporated cell company (ICC) structures offered in other jurisdictions, the IMAC stated.

A SPC insurance company will be able to incorporate one of its cells by establishing a PIC under it. Once the PIC is registered with the Cayman Islands Monetary Authority (CIMA), it may write insurance business in its own name, as a separate legal entity – an exempted company limited by shares, the association explained.

Highlights of the new regulations include:

  • A PIC can contract with other cells and other PICs within the SPC, which facilitates reinsurance, quota sharing and risk pooling
  • Although the PIC is controlled by voting shares by its SPC, participating shares can be issued to those with an economic interest in the PIC
  • A PIC can have a different board of directors to that of the controlling SPC, providing for greater governance flexibility
  • The PIC is recognized as a separate legal entity for U.S. tax purposes, including having its own federal tax identification number
  • A PIC can be wound up without affecting its controlling SPC or other PICs, or a PIC can merge with another captive
  • A foreign captive can redomicile to Cayman as a PIC where it may not be of sufficient size to operate as a stand-alone captive.

The Cayman Islands is the world’s second largest captive domicile, with approximately 760 companies under CIMA’s supervision.

*Insurance Managers Association of Cayman (IMAC) is a non-profit organization run by the insurance managers of the Cayman Islands. In operation since 1981, IMAC’s aim is to act as both regulatory liaison with the Cayman Islands Government and to promote the Cayman Islands as a captive domicile.

Source: Insurance Managers Association of Cayman (IMAC)

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