Insurance (Amendment) Law, 2013 (Law 16 of 2013)

Summary

This is the Insurance (Amendment) Law, 2013 (Law 16 of 2013), which amends the Insurance Law, 2010 of the Cayman Islands. It does two main things.

• Class B(iv) insurer: Creates a new sub-category of Class B insurer, the 'Class B(iv) insurer', by revising the net-written-premium and related-business thresholds used to distinguish Class B(ii), B(iii) and B(iv) insurers, and makes related drafting changes, such as replacing 'net premiums written' with 'net written premiums' and updating director/incorporation requirements for Class B and Class C insurers.
• Portfolio insurance companies (PICs): Inserts an entirely new Part 4A into the Insurance Law establishing a framework for 'portfolio insurance companies' (PICs) -- exempted companies (not themselves segregated portfolio companies) that are controlled by a segregated-portfolio insurer ('relevant insurer') and that can be registered with CIMA to carry on insurance business on behalf of a specific segregated portfolio without needing a separate insurance licence.

Part 4A: PIC Framework Details

• Registration and operation conditions: The new Part 4A sets out detailed conditions for registration and ongoing operation of PICs, including application and annual declaration requirements, business plan approval, and fit-and-proper requirements for directors/officers.
• Capital and governance: Minimum capital and solvency requirements and governance requirements are imposed on PICs.
• Annual return obligations: PICs must meet annual return obligations, including audited financials, actuarial valuation, and solvency certification.
• Shares and deregistration: There are restrictions on share issuance/transfer, and deregistration procedures are set out.
• Asset and liability transfer: Mechanisms are established for automatically transferring assets, liabilities and legal proceedings from a controlling insurer's segregated portfolio to a newly registered PIC.
• Offences: It also creates offences for supplying false or misleading information to CIMA in connection with PIC registration.

The law applies to insurers licensed under the Insurance Law (particularly Class B insurers and segregated portfolio insurers) and to exempted companies seeking to register as portfolio insurance companies, as well as their directors, managers and officers. Commencement is not fixed in the text itself -- section 1(2) provides that the Law comes into force on a date (or dates, for different provisions) to be appointed by Order of the Governor in Cabinet, so readers should check for a separate commencement order to determine when specific provisions took effect.

Key obligations

• An exempted company applying to register as a portfolio insurance company must, at the time of application and within six months of the end of each financial year during registration, file an annual declaration with CIMA disclosing its name (including 'PIC'/'P.I.C.'/'Portfolio Insurance Company' in its name), its controlling relevant insurer, and its directors, managers and officers.
• At the time of application, the exempted company must provide CIMA with the written consent of its controlling relevant insurer, a business plan containing prescribed details, and the prescribed application fee.
• A portfolio insurance company must at all times be controlled by a relevant insurer, include 'PIC'/'P.I.C.'/'Portfolio Insurance Company' in its name, and carry on business only per its approved business plan, seeking prior written CIMA approval for any change to that plan.
• A portfolio insurance company must obtain CIMA's prior written approval before opening an overseas subsidiary/branch/agency/office, changing its name, or (for non-long-term business) amalgamating or transferring insurance operations.
• A portfolio insurance company must maintain a prescribed margin of solvency, adequate risk-management arrangements (including reinsurance where appropriate), prescribed capital levels, and an effective system of governance approved by CIMA.
• Where its controlling relevant insurer is a Class B(iii) or B(iv) insurer, the portfolio insurance company must make its audited financial statements available on request to insured persons, third-party beneficiaries and other prescribed persons.
• A portfolio insurance company must submit an annual return to CIMA within six months of the end of its financial year, including audited financial statements (unless waived), an actuarial valuation, solvency certification (unless waived), and any other prescribed information.
• A relevant insurer must not control more than one portfolio insurance company on behalf of any single relevant segregated portfolio.
• A portfolio insurance company must have a minimum of two directors and must appoint the same insurance manager as its controlling relevant insurer, maintaining adequate business records.
• No voting shares in a portfolio insurance company may be issued, transferred or disposed of without CIMA's prior approval, and non-voting shares exceeding 10% of authorised/issued share capital likewise require prior CIMA approval.
• A portfolio insurance company, applicant, or its directors/officers must not knowingly or wilfully supply false or misleading information to CIMA, on pain of a fine of up to $100,000 and/or up to five years' imprisonment.
• A relevant insurer, its segregated portfolios and any portfolio insurance company it controls must share the same financial year end.

Applies to

insurers, Class B insurers, Class B(iv) insurers, segregated portfolio companies (relevant insurers), portfolio insurance companies, exempted companies applying to register as portfolio insurance companies, directors, managers and officers of insurers and portfolio insurance companies

Deadlines

• within six months of the end of each financial year during the continuation of registration: A portfolio insurance company (or applicant) must file an annual declaration with CIMA.
• within six months of the end of its financial year: A portfolio insurance company must submit its annual return (audited financial statements, actuarial valuation, solvency certification, other prescribed information) to CIMA.
• not later than thirty days after registration: Where the relevant segregated portfolio was carrying on insurance business, the applicant may specify a date (no later than 30 days after registration) on which assets, liabilities and business vest in the newly registered portfolio insurance company.
• such date as may be appointed by Order made by the Governor in Cabinet: Commencement of the Law (or different provisions of it) is to be fixed by a separate Order of the Governor in Cabinet; different dates may apply to different provisions.