Nov 2022
A very warm welcome to our eighth edition of Conyers Coverage. As we start to wind down on 2022 TeamConyers is already reflecting on what a hectic and exciting year it’s been for the Cayman Islands (re)insurance industry – potentially a record breaking one in fact (we shall see once final statistics are available in January)!
As usual, we have lots to cover in this edition. We discuss new rules and regulations and include important deadline reminders. We also have a number of topical updates from our litigation and regulatory colleagues, introduce a new member of our growing team and highlight some very exciting news from The Legal 500 directory. We finish off our round up as usual with some industry news and views.
The Conyers insurance team also looks forward to catching up with many of you over the three days of the Cayman Captive Forum which kicks off tomorrow – make sure to visit our booth!
101 on Segregation Rules Applicable to SPCs
A recurring “old chestnut” for those of you dealing with Cayman Islands segregated portfolio companies (SPCs) is the manner in which the statutory segregation principles apply to segregated portfolios established by an SPC. The following is a quick refresher on the segregation rules applicable to SPCs to ensure you have these requirements front of mind, particularly when a transfer of assets or declaration of a dividend is next contemplated by the SPC.
Revised Economic Substance Guidance Notes: Further Clarity for Entities Claiming to be Tax Resident Outside the Cayman Islands
The Department for International Tax Co-operation issued a revised version (version 3.2) of the Guidance on Economic Substance For Geographically Mobile Activities in July 2022.The main changes in the Revised ES Guidance Notes relate to entities claiming to be tax resident outside the Cayman Islands (TRO).
Climate Related Risks Are Heating Up: Has Your Insurer Considered its ESG Strategy?
As we draw to the end of hurricane season in the Caribbean, it is difficult to ignore the increased frequency of extreme weather events brought about by climate change and global warming (Hurricane Ian being the most devastating and obvious example from 2022, with Hurricane Nicole following as one of the latest season hurricanes on record to hit the continental United States).
This reality presents unique challenges for the insurance industry, and with it, the need to consider environmental, social, and governance (ESG) issues as part of an insurer’s overall strategy, day to day operations and long term growth. The concept of ESG has been around for some time, but has come to the fore in recent years as a hot topic for boards and senior leaders of companies around the world given the increased scrutiny that has been placed on a company’s approach to ESG by investors, stakeholders and regulators alike.
In July 2022, the Cayman Islands Monetary Authority (CIMA) issued a Supervisory Issues and Information Circular on Climate Change, Environmental, Social and Governance and Sustainability, acknowledging the importance of entities regulated in the Cayman Islands to address these risks.1
Insurers and insurance managers should expect ESG to become a greater focus of CIMA in the near future, and steps should be taken to consider how risk management and corporate governance frameworks of licensed entities could be updated to take account of the impact of climate and ESG risks as well as the roles and responsibilities of Board and senior management in managing and mitigating these risks.
Conyers will be watching this space closely so look out for future updates in Conyers Coverage as the obligation on licensed insurers to address ESG evolves in the Cayman Islands.
Regulatory Reminders: 3 Hot Topics
1. Reminder: Upcoming Economic Substance filings
- Reminder for insurers that either carried on Insurance Business or relied upon the Tax Resident Overseas (TRO) exemption during the 2021 period: the Economic Substance Returns (ESR) or TRO Forms need to be filed shortly.
- TRO and ESR filings are due 12 months after the end of the financial year, so for entities that have a calendar year financial year, the filings in respect of the 2021 financial year will be due by 31 December.
- TRO and ESR filings are made via the DITC Portal.
- The 2022 Economic Substance Notification (ESN) filings will also be due soon – the ESN needs to be filed as a prerequisite to the filing of the annual return, so these are typically filed in January (although penalties for late annual return filings accrue from 31 March).
2. Follow up CIMA AML survey for Insurers carrying on Relevant Financial Business:
- Insurers that indicated in the recent CIMA RFB Self-Declaration survey that they were carrying on Relevant Financial Business during the 2021 period (and therefore in scope of the substantive obligations under the Cayman AML Regime) will soon be receiving links to the more comprehensive AML survey.
- Guidance notes on the AML survey for insurers have not yet been published, but once available they will be accessible at https://www.cima.ky/regulatory-forms-guidance-notes
- The AML surveys for other licensed/regulated entity types have been extensive, so we encourage relevant insurance licensees to attend to the survey without delay once they receive the access links.
3. Annual AML training:
- If an insurer you manage is looking for a refresher on the AML/CFT/CFP and sanctions regimes in the Cayman Islands, please let us know and we would be happy to present a training session.
- We can provide AML training as a standalone session or as part of a Board meeting tailored for the type of insurance business carried on by the insurer.
Legal 500 2023 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 Bermuda and the Cayman Islands in The Legal 500 2023 rankings. Partner Derek Stenson maintains his ranking as a “Leading Individual” with Associate Philippa Gilkes identified in the results as a “Rising Star” in the Insurance /Reinsurance practice area. Derek and Philippa are two of only three lawyers in the Cayman Islands to have been ranked by The Legal 500 2023 in the Insurance/Reinsurance practice area.
Court of Justice of the European Union’s Decision on Beneficial Owners
In a judgment handed down on 22 November 2022, the European Court, sitting as the Grand Chamber, held an anti-money-laundering directive to be invalid which required Member States under the Charter of Fundamental Rights of the European Union (the “Charter”) to ensure that beneficial ownership information of corporate and other legal entities incorporated within a particular territory was accessible in all cases to any member of the general public.
Regulatory Administrative Fines Have Become a Wakeup Call
Do you understand your obligations under the Monetary Authority (Administrative Fines) (Amendment) Regulations? The Cayman Islands has a high level of regulation and CIMA is a careful regulatory watchdog that is actively engaged in protecting the integrity of its regulatory space.
With the potential for serious consequences to breaches of the ever-growing regulatory landscape, it is important that all persons involved with entities regulated under these laws understand their obligations.
Directors’ Duties on the Precipice of Insolvency: Brief Overview of BTI 2014 LLC v Sequana SA
The United Kingdom Supreme Court recently delivered its eagerly anticipated judgment in BTI 2014 LLC v Sequana SA and others [2022 UKSC 25]. The reasoning in Sequana will be highly persuasive in the Cayman Islands, as well as other common law jurisdictions. With the potential for serious consequences to breaches of the ever-growing regulatory landscape, it is important that all persons involved with entities regulated under these laws understand their obligations.
The Boundaries, and Benefits, of ‘Gross Negligence’ Under Cayman Islands Law
Is there a useful commercial purpose for including the concept of ‘gross negligence’ as an exception to an indemnity or limitation of liability clause? Partner and Head of Cayman Islands Litigation & Restructuring Alex Potts KC and Associate Jordan McErlean discuss.
Judicial Mediation in the Cayman Islands: Some New Judicial Guidelines
Alternative Dispute Resolution, both through private arbitration and private mediation, is increasing in popularity in the Cayman Islands, with regard to the time, costs, adverse costs risks, and uncertainties of litigation before the Courts, whether that litigation is local or cross-border in nature.
Meet the team: Claire O’Flynn
Claire O’Flynn joined Conyers in 2022 to assist clients in arranging, holding and minuting their board meetings. Claire is a company secretary and is also a fully qualified Irish Solicitor (non-practising) specialising in litigation and insurance matters. Claire also has extensive in-house experience in the insurance field having formerly worked for a multinational insurance company.
Following Claire’s addition to the team, Conyers is pleased to now offer board support services to supplement the legal, regulatory and fiduciary assistance currently provided to our broad base of insurance and reinsurance clients. The provision of board support services is likely to be particularly appealing to our self-managed insurer clients, brokers and agents, and can also enhance and support the services currently provided by insurance managers for larger and more complex Class B insurers.
More details on the full board support services which Claire can provide are available here.
The Cayman Captive Forum is back!
The Conyers insurance team is looking forward to attending the Cayman Captive Forum from 29 November to 1 December and the opportunity for the first in-person catch up with many clients in three years!
Associate Philippa Gilkes will be speaking on a panel on 29 November at 3:00 pm to discuss the benefits of Cayman as a (re)insurance jurisdiction and the process for redomiciling an insurer to the Island – so please check that out.
Conyers is an exhibition sponsor at the conference, and you’ll find our booth next to the coffee station where we will have coffee related extras and other treats to improve your break time. We look forward to connecting with those travelling to Cayman for the conference – please reach out if you would like to arrange a meeting with Derek or others in our team during the conference.
Our delegation includes Partners Derek Stenson, Alex Potts and Jonathan Milne, Jarladth Travers (Head of Conyers FIG (Cayman)), Mark Mugglestone (Vice President at Conyers FIG (Cayman)), Counsel Spencer Vickers and Associates Philippa Gilkes and Frank Farrell.
Local Industry News
- As noted in our previous edition of Conyers Coverage, all insurers will be required to consider and implement changes to their investment policy (and if a Class B(iii) or D, establish an investment committee) by February 2023 in order to comply with the Rule and Statement of Guidance on Investment Activities for Insurers. A link to our article on the 5 key things to consider is available here.
- CIMA’s New Insurer Licensee Statistics for Q3 2022 is available here.
Please contact Derek Stenson, or one of your usual Conyers contacts should you wish to know more about any of the topics covered in this newsletter.
1https://www.cima.ky/upimages/noticedoc/SupervisoryCircular-ClimateChange,Environmental,SocialandGovernanceandSustainability_1657570731.pdf