Jan 2025
A warm welcome to this 12th edition of Conyers Coverage to kick off 2025. Now that the dust has settled, our team is reflecting on another exceptional year for the Cayman Islands (re)insurance industry in 2024. We lawyers may experience numeracy difficulties but even for us the figures are plain to interpret. According to CIMA’s statistics for 2024, Cayman had a record number of new licensees in a single year (40), a record number of reinsurance companies now licensed in the Cayman Islands (100) and the local industry has reached record levels of premium written and assets under management. In addition, the industry has more full time staff than ever working on the ground with a number of Class B(iii)s in particular increasing their on-island presence, the Captive Forum (the world’s largest captive conference) had a record attendance and ReConnect, Cayman’s first dedicated reinsurance conference, was by any metric a runaway hit (register here for the 2025 version!). With momentum like that it’s unsurprising that we are anticipating a busy and buoyant 2025.
Notwithstanding, there is of course lots of work to do and regulatory developments to address and in this edition we address topics which have been raised by clients frequently in recent months. We include an analysis of recent Cayman Court decisions involving segregated portfolio companies, debunk some common misconceptions regarding the Cayman Islands regulatory regime, consider the marriage of private equity and reinsurance and answer FAQs on Cayman immigration considerations for employees of (re)insurers. We are also delighted to introduce you to a new member of our team, Cristina Faro, and as always round out the edition with topical updates from our regulatory and litigation colleagues.
From me and the entire Conyers Insurance and Regulatory teams, an enormous thank you for the continued support and we hope everyone is off to a flying start to 2025.
Debunking Common Cayman Clichés: Episode 3 – Regulation of Life & Annuity Reinsurers
Cayman has in recent years emerged as a disruptor in the international reinsurance market and is therefore attracting its fair share of attention. Some of this commentary is well-informed, reasonable and objective which we would always encourage. Some however, particularly during 2024, was frankly sensationalised click bait. Accordingly, Cayman Islands service providers, regulators, industry associations and established reinsurers are frequently playing the role of educator to debunk misconceptions around the perceived dearth of regulation in the Cayman Islands. At Conyers we are continuing to do this methodically and in this latest article we address common misconceptions around actuarial and capital requirements (and the perceived lack thereof for whatever reason!) for life and annuity reinsurers in the Cayman Islands
- Continual Evolution of Our Regulatory Framework: CIMA’s regulatory measures are frequently revised and updated, demonstrating continual and organic maturity and evolution of the Cayman Islands legal and regulatory regime. Most recently, the rules and statement of guidance on reinsurance arrangements and regulatory policy on the recognition and approval of actuaries (see our articles on each here and here for more detail). Cayman (re)insurers writing long term business are required to submit an actuarial valuation report to CIMA on an annual basis, which is subject to peer review by another approved actuary. The updated regulatory policy enhances the requirements for an actuary to be approved to act in this role by CIMA.
- Capital Models: Reinsurance groups continue to be attracted to the Cayman regime for a host of reasons including the ability to design a capital, investment and resourcing model that works for the particular reinsurer’s proposed operations. However, the absence of heavy prescription in the legislation as to the requirements for a capital model does not equate to an absence of regulation in Cayman. Occasionally the $400,000 Minimum Capital Requirement required per our Insurance Act for Class B(iii) long term insurers is misunderstood and we can confirm this is not a minimum standard for any reinsurers we have advised over the years. Instead the true minimum capital required to be held by a Cayman Islands reinsurer is the “Prescribed Capital Requirement” which can be agreed with CIMA. In our recent experience, CIMA’s preference for the PCR is a baseline percentage of the RBC Authorized Control Level, coupled with a limit on non-agency structured securities, private credit securities and mortgage-backed securities. However, any assertion that CIMA is the only gatekeeper in obtaining the approval of a proposed capital model is in practice a mere illusion. Any such capital model needs to be supported by actuarial analysis, typically provided by one of the leading US actuarial firms, and must be satisfactory to a whole host of stakeholders in addition to CIMA, such as the cedent, cedent’s regulator, rating agencies and investors to name but a few. Regardless of the capital model agreed with CIMA, many observers of the jurisdiction are unaware that all life & annuity reinsurance agreements between US based ceding companies and Cayman Islands licensed reinsurers are fully collateralized at US statutory reserve levels. Assets backing the ceded risks are held in the US in qualifying reserve credit trusts or custodial accounts on the ceding company’s balance sheet. Until Cayman hopefully acquires Qualified Jurisdiction status, and thereafter potentially Reciprocal Jurisdiction status with the NAIC, this practice will continue and we trust the above, albeit high level summary, gives a flavour of the local requirements and dispels any lingering misconceptions on these points.
- Transparency: In a previous article we commented on CIMA’s transparency and information sharing practices which we hope helps debunk a misconception prevalent in the market that, for whatever reason, CIMA will not engage or liaise with peer regulators, which is wholly erroneous in practice. Notwithstanding, a key goal for the jurisdiction in 2025 will be to improve connections and close the knowledge gap of US regulators in relation to the Cayman regime, many of whom may not be across the stringent actuarial and financial reporting and capital requirements which are imposed on Cayman Islands reinsurers in the life & annuity space. Whilst CIMA has Memorandums of Understanding with many US insurance regulators and an overarching MoU with the NAIC, there is room to improve awareness around the extent of our regulatory framework, particularly with those US regulators with responsibility for large segments of the life & annuity market which could potentially find a home offshore. By way of example, many large life & annuity reinsurers are required to provide quarterly financials to CIMA along with calculations of their Prescribed Capital Requirement, are not permitted to enter into a reinsurance transaction without CIMA’s prior approval, and are required to have a fully independent director on their board, to name a few common oversight measures. None of these conditions are found in statute, but are implemented by CIMA in licensing conditions which are tailored specifically to the size, nature and complexity of the particular (re)insurer, as opposed to a once size fits all approach imposed by rigid legislation.
What we can expect in 2025
2025 will be another year for the jurisdiction to roll up our collective sleeves and continue educating stakeholders in the international reinsurance market on the Cayman Islands regulatory landscape. A number of projects and changes are bubbling away, which we consider will contribute to the Cayman Islands’ standing in the life & annuity community, including:
- proposed increased staffing in the Insurance Division at CIMA to tackle the volume and complexity of new entrants to the market;
- uptick in engagement between CIMA and onshore regulators;
- circulation of a white paper prepared by CIRCA demonstrating the robustness of the regulations currently in place and an overview of actuarial requirements; and
- progress of the NAIC Qualified Jurisdiction status following completion of the sponsor state’s “onsite review” of CIMA in Q1/Q2 2025.
In the meantime, opportunities abound to learn more about Cayman. Please call us or visit Cayman. The second [Re]Connect conference to be held in Grand Cayman in April 2025 will be a perfect opportunity to hear more on these topics from CIMA, actuaries, Cayman and US lawyers and reinsurers on the ground in Cayman. Don’t miss out.
Case Law Update Confirming Segregated Portfolio Principles for SPCs – Re Oakwise Value Fund SPC
In the recent judgment of Kawaley J in Re Oakwise Value Fund SPC (“Oakwise”), the Cayman Islands Court provided welcome confirmation of the key principles of segregation between the separate segregated portfolios of a segregated portfolio company (SPC). This case is of particular interest to insurers established as an SPC, or parties facing a segregated portfolio of an SPC. The Court deemed it appropriate in this case to appoint joint provisional liquidators to assist with restructuring the SPC, with the order including directions regarding the “spin off” of the solvent SPs to new successor vehicles (with the consent of CIMA) in tandem with plans to restructure the insolvent EFI SP, thereby upholding the segregation principles applicable to SPCs. This case is notable reinforcement from the Courts of the applicable segregation principles fundamental to the operation of SPCs which are well-established and protected in Cayman Islands law.
Read on here for a closer look at this case from the Conyers litigation team who acted for Oakwise.
4 Hot Regulatory Topics
1. Supervisory Information Circular on Complaints Handling
In October 2024, the Cayman Islands Monetary Authority (CIMA) issued a Supervisory Information Circular setting out how regulated entities should implement and embed effective complaints handling policies/procedures.
The Circular provides guidance as to how regulated entities should maintain complaints handling policies/procedures to address complaints fairly, effectively and in a timely manner in accordance with CIMA’s expectations. The Circular supplements CIMA’s Rule and Statement of Guidance on Internal Controls and Rule on Corporate Governance, which require directors to ensure that complaints are appropriately addressed and regulated entities to maintain adequate complaints handling procedures.
These include requirements for the governing board and senior management of a regulated entity to periodically receive reports summarising key details of complaints received and any key control issues, including information as to the nature of the issues, volume, frequency, trends identified, how the issues were rectified, lessons learned, and disciplinary actions undertaken for non-compliance to ensure the same are properly evidenced. The complaints report should also highlight any identified systemic issues and/or undue override of existing controls in addition to addressing the measures implemented for remediation.
In terms of the operation of the complaints handling procedures, the Circular confirms that CIMA considers it best practice for regulated entities to: (1) provide a contact to whom complaints can be made; (2) establish reasonable timeframes for processing complaints; (3) explain the review process to the complainant; and (4) operate redress mechanisms to compensate complainants where appropriate.
In addition, regulated entities should ensure that staff receive adequate formal training on complaints handling on an initial and ongoing basis, and that complaints are investigated independently by staff of sufficient seniority.
2. Beneficial Ownership Updates
The Beneficial Ownership Transparency Act, 2023 (the “BOT Act”) and the Beneficial Ownership Transparency Regulations, 2024 (the “BOT Regulations”) came into force on 31 July 2024, with full compliance required by 1 January 2025 (the “Beneficial Ownership Regime”). This replaces the prior beneficial ownership Regime. The exemptions in the prior beneficial ownership legislation have been removed, although entities “licensed under a regulatory law”, such as (re)insurers licensed with CIMA are able to utilise an “alternative route to compliance” under the updated Beneficial Ownership Regime. It is worth noting that any Cayman Islands affiliates that are not licensed or registered with CIMA, are no longer eligible for an exemption and are now required to maintain a beneficial ownership register if they are not able to rely upon an “alternative route to compliance” under the updated Beneficial Ownership Regime.
Licensed (re)insurers are required to file a written confirmation via their registered office provider with the Cayman Islands General Registry stating that they are licensed under the Insurance Act and providing their licence number. We recommend that the Boards of all Cayman Islands entities pass resolutions to confirm their status under the new Beneficial Ownership Regime. Conyers can assist with the requisite resolution and advice on compliance with the relevant changes now in force.
3. Cayman Islands Status with the EU and the Financial Action Task Force (FATF)
After having been removed from the Financial Action Task Force (FATF) grey list in October 2023 and the EU AML List in February 2024, the Cayman Islands achieved a further milestone appointed as one of two countries to be the first ever FATF Guest Members in October 2024. This membership allows the Cayman Islands to participate in FATF’s plenary sessions and all key working groups for the next year, and provides an opportunity to feed into and promote the organisation’s work to set global standards on the prevention of money laundering and terrorist and proliferation financing.
4. Industry Advisory: New Defence Against Money Laundering (DAML) / Consent Regime
Effective from January 2, 2025, amendments to the Proceeds of Crime Act (POCA) mandate that any person (including a financial institution) that files a suspicious activity report (SAR) in respect of suspected money laundering or illegal activity must obtain prior consent from the Financial Reporting Authority (FRA) in order to carry out activities related to the SAR and have a defence against money laundering in respect of such activities. Draft regulations are expected to be issued for industry consultation later this month, and in the meantime the FRA Advisory issued on 10 January 2025 provides helpful interim guidance on making DAML / Consent requests.
The key messages from the FRA Advisory are as follows:
- Submitting Requests: Completed SARs should be submitted via AMLive portal or secure email, and should clearly indicate that the filing is a “DAML SAR” and detail the reason for the suspicion and activity involved.
- Consent and Notice Period: The FRA Director or authorised individuals will be responsible for handling consent decisions. The FRA is required to respond within 7 working days; if no response is received, consent is deemed to have been granted.
- Refused Consent: If consent is refused, a 30-day moratorium period begins, during which no related activities should occur in order to avoid any money laundering offences being committed.
For the latest Cayman Islands regulatory updates from our team, please refer to our latest Regulatory & Risk Advisory Outlook available here.
Portfolio Insurance Companies and the Updated Beneficial Ownership Regime
The Beneficial Ownership Transparency Act, 2023 (the “BOT Act”), Beneficial Ownership Transparency Regulations, 2024 (the “BOT Regulations”) and the Guidance on Complying with Beneficial Ownership Obligations in the Cayman Islands (the “BOT Guidance”) all came into force on 31 July 2024, with enforcement suspended until 1 January 2025. As we count down to the January deadline, we take a closer look at how the updated beneficial ownership regime applies to the nearly 60 portfolio insurance companies (PICs) registered pursuant to the Insurance Act, 2010 (as amended).
Read here to find out more.
Navigating the Challenges of Complying with Immigration Requirements
Continued growth in the industry, confidence in the jurisdiction, and economic substance factors have seen a number of leading reinsurers establish or expand their physical presence in the Cayman Islands over the past year. For these companies, understanding and complying with immigration requirements is a daunting yet critically important matter. Who is allowed to work? What types of employment authorisation are available and suitable for particular situations? What are the processes for obtaining a particular immigration permission? How long does it take? And, importantly, what are the cost implications? Conyers’ resident immigration expert Christopher Eakin answers some of the most frequently asked questions here.
Insurance and Asset Managers in the Cayman Islands: A Perfect Marriage?
The significant growth in life & annuity reinsurance in the Cayman Islands has showed no signs of slowing in the past few years and a material ingredient of this growth is Cayman reinsurers sponsored by large private equity / asset manager groups who have long had a significant footprint in the Cayman Islands. The Cayman Islands have long been the leading domicile for investment funds, housing over 30,000 registered funds by the end of Q4 2024. As the reinsurance sector matures and asset manager / private equity backed partnerships (such as Aspida/Ares, Talcott/Sixth Street, Brookfield/North End Re and Third Point/Malibu Life) become more established, it’s timely to take a closer look at the evolving relationship between the insurance and fund management sectors from a Cayman Islands perspective.
Read here to find out more about the connection between these sectors.
New Regulatory Policy on Recognition and Approval of an Actuary
In October 2024, the Cayman Islands Monetary Authority (CIMA) issued an updated Regulatory Policy on the Recognition and Approval of an Actuary (the “Policy”), setting out its minimum criteria and process for determining whether to recognise and approve an actuary to be appointed by a (re)insurer, in accordance with the professional standards of all internationally recognised actuarial governing bodies. It is a positive development for the actuary approval criteria to be strengthened and refined, and as we continue to see growth in the long-term (re)insurance market in Cayman, the strength of our actuarial review process is becoming increasingly relevant. In particular, the changes include confirming a guideline level of a minimum of 5 years’ relevant experience, more comprehensive evidence required for CIMA’s review and more detailed criteria for potential disqualification, which helps to ensure that actuaries acting for (re)insurers meet and continue to meet the appropriate criteria.
We take a look here at the new Policy and how it applies to Cayman Islands (re)insurers who need to ensure that any actuary they propose to appoint to prepare, or peer review, their actuarial report is approved in accordance with CIMA’s Rule and Statement of Guidance – Actuarial Valuations (the “Rule and SoG”).
Meet the Team
The Insurance team continues to expand in the Cayman Islands with the recent addition of Cristina Faro. Cristina joins Conyers to advise and support on a range of regulatory and commercial matters, with a focus on the insurance and reinsurance sector. Prior to relocating offshore, Cristina gained extensive experience in the London insurance market, managing a range of financial services litigation, coverage and regulatory advisory matters, including cross-border regulatory projects and investigations. She has also developed a specialism in advising InsurTech and FinTech businesses and looks forward to continuing this work on Island. Welcome to the team, Cristina!
AM Best to Hold Market Briefing in Cayman
AM Best will host a market briefing to discuss its outlooks on the US insurance industry’s major segments and the global reinsurance industry, along with leading issues facing the re/insurance industry on Wednesday, 12 February 2025, at the Grand Cayman Marriott Resort. Senior AM Best analytical staff will be on Island to present their outlook on the global insurance market, recent ratings and investment trends, potential changes in criteria and global benchmarking data. More information and details on registration is available on the AM Best website.
ReFocus Las Vegas 23-26 February 2025
The Conyers Cayman and Bermuda Insurance teams will be out in force at ReFocus 2025 to be held at Fontainebleau Las Vegas for the first time. We are looking forward to connecting with others in the life & annuity industry who are keen to understand more about the offerings of our jurisdictions and teams. Look out for our “Conyers Café” on the conference room floor!
[Re]Connect returns 10-11 April 2025
The hotly anticipated second edition of the CIRCA [Re]Connect Reinsurance Conference returns to the Ritz Carlton Grand Cayman on Thursday 10 and Friday 11 April 2025. After a stellar inaugural conference with over 450 attendees, delegates at this year’s [Re]Connect can expect panel discussions to dig deeper into the actuarial and regulatory landscape for reinsurers in Cayman. In addition to an insightful agenda, Cayman hospitality will be in full swing with a number of networking events planned over the course of the two days. Secure your registration here to avoid missing out.
Legal 500 2025 Results: Conyers Retains Tier 1 Status
Conyers is proud to once again be the only law firm ranked Tier 1 for insurance/reinsurance in both the Cayman Islands and Bermuda in The Legal 500 2025 rankings. Partner Derek Stenson maintains his ranking as a “Leading Individual” with Philippa Gilkes recognised as a “Leading Associate” and Sarah Howie and Frank Farrell recognised for their vital contribution to the team. Derek and Philippa are two of only four lawyers in the Cayman Islands to have been ranked by The Legal 500 2025 in the Insurance/Reinsurance practice area.
Conyers Regulatory & Risk Advisory team has also advanced to Tier 2 status, with Róisín Liddy-Murphy and Sarah Howie recognised as “Next Generation Partners” with Wayne Flanagan ranked as the only “Leading Associate” across the regulatory and compliance practice groups in the jurisdiction.
CIMA’s 2024 Licence Statistics
The year in review licence statistics have just been released by CIMA, in another bumper year for the Cayman Islands insurance market, with over 40 new insurers set up and licensed to write business during 2024. This brings the total number of licensed (re)insurers in the Cayman Islands to a healthy 721, demonstrating year on year industry growth.
The life side of the industry has seen some impressive players taking a large share of total gross written premiums, with around 40 life insurers accounting for almost 30% of all premium written in the Cayman Islands during 2024. Notably we were pleased to also see quite a number of P&C players enter the market, which we feel is very much indicative of a robust and buoyant market. We also saw the overall number of Portfolio Insurance Companies (“PICs”) rise by 7 to a total of 61, with the use of PICs steadily gaining more interest as a flexible tool for insurers to structure insurance/reinsurance programs.
As in previous years, Conyers is delighted to have advised a majority of new licensees, and is continuing to see a strong influx of incoming insurers to support another great year of industry growth in 2025.
Cayman Captive Forum 2024
IMAC hosted another successful Cayman Captive Forum in December 2024. The annual gathering brought global industry leaders, innovators and professionals together in the Cayman Islands to discuss the latest trends, challenges, and advancements in the captive insurance sector.
Conyers Insurance and Regulatory experts Derek Stenson, Róisín Liddy-Murphy, Philippa Gilkes, Sarah Howie, Frank Farrell, Wayne Flanagan and Cristina Faro took the opportunity to connect with clients and industry peers over the course of the three day event.
Frank Farrell’s panel discussion on Captive Fundamentals was a highlight of our participation at the conference, offering a useful perspective on the role of Cayman legal counsel in providing establishment, operational and regulatory advice to captives.
Thanks to all who connected with our team or visited the Conyers booth. See you again next year!
IMAC Golf Day
Conyers was proud to once again sponsor the IMAC Golf Scramble in October 2024. All proceeds of this event go to the IMAC Educational Scholarship Fund, which awarded $240,000 in scholarships in 2024, supporting the next generation of Caymanians in their educational pursuits. Congratulations to the winners and thank you to everyone who came out to support the cause and enjoy a fun day on the course and to all who contributed to another successful event.
Cayman Islands Monetary Authority and Registry Update to Fees
CIMA has implemented increases to their fees which took effect from 1 January 2025.
While no fee increase is ever welcome, the fee increase has been long overdue as regulatory fees have remained largely unchanged over the last decade, and are in any event not significant. By way of example, the annual licensing fee for a Class B(iii) (re)insurer has increased from US$12,600 to US$16,200.
CIMA took the approach of billing the 2025 Annual Renewal Fees in two stages:
- initially, in accordance with the prior fees regime; and
- upon the increased fees being officially gazetted on 19 December 2024, the remaining amount of the increased fees were billed as they fell due.
The Cayman Islands Registrar of Companies also announced updates to their fee schedules for 2025. These changes affect certain entity types and include adjustments to both registration and annual fees. The annual fee for an exempted company with an authorised share capital of US$50,000 (as is the usual position) has increased to US$1,110 per year.
For further details or queries on these updates, please reach out to your usual Conyers contact.
The Evolution of the Registered Office
We have all seen the Cayman regulatory landscape change during the past decade, and no sector has been left untouched. One sector which has been particularly impacted is the corporate service providers sector, which includes the provision of Registered Office services. The Registered Office service used to be seen as somewhat of a mailbox type service, but has evolved over the last decade to include additional levels of oversight and attendance to multiple regulatory filings.
This uplift has been seen across multiple regulatory regimes.
- We have seen an increase in Registered Office providers’ obligations under the AML regime, as well as an increase in enforcement, primarily resulting following CIMA inspections. The largest administrative fine to date has been issued to a corporate services provider.
- With the introduction of the Economic Substance Regime, a number of registered office providers took on the role of Responsible Person, meaning they became tasked with ensuring the Economic Substance Notifications had been filed, in order for the annual return filing to be made.
- The latest change to the Registered Office role is the revised Beneficial Ownership Regime. Ensuring compliance with the new regime by 1 January 2025 involved outreach to all clients, review and verification of all particulars included in the filings. From a practical perspective it often also involved some level of changes to internal software and processes to ensure additional data fields could be collected and reported via the revised filing format. The enhancements to our Beneficial Ownership Regime are a key priority for the jurisdiction, and the registered office providers have been playing a significant role.
While all these changes are beneficial and add to the robustness of the Cayman Islands regulatory landscape, we take a moment to appreciate the increasing obligations of Cayman corporate service providers and the vital role they play ensuring the soundness of our financial services sector.