Jan 2025
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”).
Refresher on the role of an actuary acting for (re)insurers
Unless otherwise exempt, the Insurance Act, 2010 (the “Act”) requires each (re)insurer (except Class C and Class B (re)insurers not writing long term business) to submit with its annual return to CIMA an actuarial valuation of its assets and liabilities including loss and loss expense provisions, certified by an actuary approved by CIMA. The Rule and SoG introduced in November 2019 provides guidance on CIMA’s expectations for the actuarial reports.
A long term (re)insurer would typically select their actuary at the time of licensing and provide CIMA with the actuary’s consent to act and key details relevant to CIMA’s criteria for recognition and approval of an actuary. Where an external actuary is appointed, it is the appropriately qualified individual at the firm who is appointed by the Board and approved by CIMA, rather than the firm itself.
The actuary must prepare the actuarial valuation report in compliance with the Rule and SoG and follow acceptable professional actuarial approaches in their work.
The board of directors of the (re)insurer have oversight responsibilities for the actuary including ensuring the appointment is in line with corporate governance and outsourcing rules, any changes are approved by CIMA, the data on which an actuarial report is based is signed off by directors or senior managers and that the actuarial valuation report is acknowledged and reviewed and any recommendations implemented by the board.
For a more detailed refresher on the role of actuaries of Cayman Island (re)insurers, please see our previous article here.
New minimum criteria for recognition
The Policy confirms that CIMA will recognise an actuary as being an actuary so defined in the Act if the actuary meets the following minimum criteria:
- is a qualified fellowship member in good standing of the Institute and Faculty of Actuaries in the UK or the Society of Actuaries, Casualty Actuarial Society or the American Academy of Actuaries in the United States of America or the Canadian Institute of Actuaries in Canada;
- if not meeting 1 above, holds an actuarial qualification and is a fellowship member in good standing with some other professional association that applies the following to its members in line with additional criteria: (a) education requirements; (b) a code of professional conduct; and (c) a disciplinary process; or
- if not meeting 1 or 2 above, holds an actuarial qualification issued by a professional association, provided that the person is of good standing, evidence of which CIMA will consider on a case-by-case basis.
The additional criteria for the professional association rules described at 2 above are described in detail in the Policy at section 5.2.
New minimum criteria for approval
The Policy confirms that CIMA will assess whether to approve an actuary by applying the following criteria:
- requiring five years’ of post-fellowship experience in the relevant line of business (such as life, annuity, or reinsurance business);
- or in lieu of an actuary having five years’ post-fellowship experience, CIMA will comprehensively consider the applicable work experience, standing, education, and other factors of an actuarial candidate;
- meeting the continuing professional development requirements promulgated by the actuary’s professional body;
- being clear of any disciplinary issues outstanding with their professional body; and
- not being in a position of any actual, potential, or perceived conflict of interest, including assessment of whether there has been full disclosure of any actual or potential, or perceived conflict to CIMA, and that the actuary’s ability to act fairly is unimpaired.
In addition, CIMA will determine whether an actuary is fit and proper for an actuarial function, considering the integrity, honesty, reputation, competence, capability, and financial soundness of the proposed actuary.
Approval process
The approval process applied by CIMA under the Policy include CIMA reviewing, at a minimum, the following:
- a cover letter from the (re)insurer requesting CIMA to approve the actuarial candidate that includes: (a) reason for any change in actuary outside the original actuarial firm, a written explanation of the change (including a resignation letter from the departing actuary), and confirmation that the new individual meets the required criteria; and (b) confirmation that any actuarial candidate will have the ability to communicate directly with the board of directors who will also have direct access to the actuary to preserve independence;
- a CV or resume for the actuarial candidate with details of relevant qualifications, experience and memberships of professional associations; and
- certified copies of certificates and/or evidence from the professional body that the candidate is qualified fellowship member in good standing.
CIMA may in its discretion seek further information in order to complete its assessment as to whether the candidate meets the assessment criteria. CIMA will issue a written notification to the (re)insurer of its decision to approve or refuse a candidate to act as an actuary of a licensee, which may include conditions on the approval or reasons for the refusal.
Criteria for disqualification
If CIMA considers that a person occupying the role of actuary for a (re)insurer is no longer fit and proper, CIMA can require the (re)insurer to remove the actuary from their role. In doing so, CIMA will consider (but is not limited to considering) the following criteria:
- any failure to perform the functions and duties of such an appointment to a satisfactory level in CIMA’s view;
- any failure to meet recognition and approval criteria for the actuarial appointment or the continuous professional development requirements of the actuary’s professional body; and
- any actual, potential, or perceived conflict of interest that impedes the actuary’s ability to act fairly that has not been fully disclosed to CIMA.
Where an individual from an external actuarial firm is appointed, the (re)insurer must take steps to ensure that the firm maintains robust processes in order to meet CIMA’s requirements for actuaries under the Policy, Rule and SoG.
The failure of an actuary to meet CIMA’s criteria may impact CIMA’s acceptance of the (re)insurer’s actuarial reports and/or future actuary appointments. CIMA will follow due process for disqualification of an actuary in accordance with applicable regulatory laws if it establishes that any actuary is outside of criteria for approval and will first notify the actuary and (re)insurer of its intention to do so before revoking its approval of the actuary.
The Conyers team are on hand to assist with CIMA requirements arising from any proposed appointment or change in actuary as well as any immigration or employment issues that may arise for (re)insurers that are looking to appoint an actuary who is proposed to be based on Island.