The Cayman Islands has new legislation in place which it hopes will help it to grow its share of the global catastrophe bond and reinsurance market. Two new classes of reinsurer have been created, and amendments made to the Cayman’s immigration policies, as it seeks to attract more of the new capital entering the reinsurance market to its shores. The changes have now come into force with the enactment of amendments to the Cayman Islands Insurance Law 2010.
The new insurance law amendments were voted on by the Cayman’s legislative assembly back in September. The new law brings two new classes of reinsurer into play; a Class C category which relates to the entities providing reinsurance through the issuance of catastrophe bonds, insurance-linked securities (ILS) or other similar instruments, and a Class D category for reinsurers.
The law has been designed to allow the domestic and international re/insurance markets to be clearly delineated in the Cayman’s, to regulate each according to its requirements, to strengthen legislation to protect Cayman residents and to bring the legislation into line with international standards. The Cayman Islands hope that the new laws will open up new avenues for reinsurance business and based the laws on recommendations from the International Monetary Fund to ensure international standards were followed.
As part of the new laws the registration fees for Class C catastrophe bond or ILS issuers have also been announced. The registration fee will now stand at USD$6,098, which is CI$5,000. The Cayman’s hope this will help them to continue to attract registrations of ILS and cat bond issuers.
The new insurance law also:
- Abolishes the distinction between unrestricted and restricted Class B licences, instead providing for three new sub-classes of Class B licence for non-domestic insurers, based on the percentage of net premiums originating from the insurer’s related business;
- Tightens the definition of the carrying on of “insurance business”, in particular removing references to contingent contracts for money;
- Establishes more comprehensive annual return reporting requirements for licensed insurers, agents, managers or brokers;
- Regulates transfers or the amalgamation of long-term business between licensed insurers, including requiring the approval of the Cayman Islands Monetary Authority (“CIMA”);
- Provides for the settlement of disputes in relation to contracts of domestic insurance by way of arbitration, even in circumstances where there is no arbitration agreement in place; and
- Clarifies and significantly strengthens the penalties for non-compliance with the law, in order to provide a real and effective deterrent to the carrying on of insurance business without a licence, or in contravention of the terms of the relevant licence or of the law.
The amendments made to the Cayman Islands Immigration Law are intended to incentivise reinsurers and fund administrators to relocate to, and establish operations in the Cayman’s. Amendments include the availability of ten-year work permits for executives and managers in the reinsurance industry and free work permits for various categories of administrative staff for their first five years of residence.
The Insurance Managers Association of Cayman commented that they believe with these changes; “Substantial growth in the reinsurance sector in Cayman is anticipated.”
As we revealed last week, the Cayman Islands Stock Exchange is going to make any listed cat bond or ILS notes tradable on the exchange in 2013.