Statement of Guidance: Responsibilities of Insurance Managers (August 2017)

Summary

This is a Statement of Guidance issued by the Cayman Islands Monetary Authority (CIMA) in August 2017 setting out CIMA's expectations for how licensed insurance managers should operate, both in their dealings with the client insurers (Class B and Class C insurers) they serve and in their dealings with CIMA itself. It is guidance rather than binding law, but it establishes minimum standards that CIMA expects insurance managers to meet, proportionate to the nature, scale and complexity of their clients' business, and it should be read alongside other CIMA measures such as the Rule on Internal Controls, the Corporate Governance SOG, the Records SOG, the Outsourcing SOG and the AML/CFT Guidance Notes.

Role and Local Presence

The document describes the insurance manager's role in running the day-to-day operations of client insurers, covering policy administration, claims reserves, reinsurance administration, payments and recordkeeping. It requires a genuine Cayman Islands presence, with mind and management, staff, facilities and records located locally, and client bank accounts and assets kept separate from and controlled apart from the manager's own.

Dealings with CIMA

• Point of contact: The manager acts as principal point of contact with CIMA, including timely reporting and fee payments.
• Prior approvals: The manager must seek prior approvals for changes in shareholders, directors or business plan.
• Disclosure: The manager must disclose breaches or difficulties to CIMA.
• Statutory duty: There is a reiterated statutory duty to notify CIMA of fitness/probity or solvency concerns about a client insurer.

Management Agreement Requirements

The guidance details the required content of the written Management Agreement between insurance manager and client insurer, and calls for periodic review of that agreement.

• Fee terms: The agreement must set out fee terms.
• Authority to act: The agreement must specify the manager's authority to act.
• Acceptance of actions: The agreement must provide for acceptance of the manager's actions.
• Reporting obligations: The agreement must set out reporting obligations.
• Termination provisions: The agreement must include termination provisions, including a 60-day notice requirement.
• Confidentiality: The agreement must include confidentiality provisions.
• Governing law: The agreement must include a Cayman Islands governing law clause.

Key obligations

• Insurance managers must maintain a place of business, mind and management, staff and facilities in the Cayman Islands sufficient to service client insurers.
• Insurance managers must control client insurers' bank accounts and safeguard their assets from within the Cayman Islands, keeping them separate from the manager's own accounts and assets.
• Insurance managers must maintain complete and proper books and records for each client insurer on an ongoing basis and for a minimum of five years after cessation of the business relationship, readily accessible to CIMA.
• Insurance managers must act as principal point of contact with CIMA, communicating openly and co-operatively and responding promptly to CIMA's questions or requests.
• Insurance managers must ensure timely submission of client insurers' prudential reports, financial statements and statistical returns, and timely payment of client insurers' licence fees.
• Insurance managers must seek CIMA's prior approval for changes of shareholders, directors, managers or officers of the client insurer, and seek approval or give notice for changes to the client insurer's business plan per CIMA's policies.
• Insurance managers must inform CIMA in a timely manner of any legal or regulatory breaches by the client insurer, and of difficulties obtaining information from the client insurer.
• Insurance managers must notify CIMA if they have concerns about the fitness and probity or financial soundness of a client insurer (statutory requirement under the Law).
• Insurance managers must conduct initial and ongoing due diligence on the fitness and probity of client insurers, including new or proposed shareholders and directors, before initial licensing and before submitting approval requests to CIMA.
• Insurance managers must maintain a documented policy for handling conflicts of interest and a process for tracking and resolving complaints from client insurers and policyholders in a timely manner.
• Insurance managers must enter into a written Management Agreement with each client insurer covering fees, authority to act, acceptance of actions taken, reporting to directors, service of legal documents, recordkeeping requirements, responsibilities, termination arrangements, confidentiality and Cayman Islands governing law.
• Either party to a Management Agreement must give CIMA 60 days' written notice of intended termination, and give sufficient notice to the other party to allow alternative arrangements.
• The Management Agreement should be reviewed periodically to capture changes to the Law or regulatory framework.

Applies to

insurance managers, Class B insurers, Class C insurers

Deadlines

• 60 days: Either party to the Management Agreement must give CIMA 60 days' written notice of intended termination of the agreement.
• minimum of five years following cessation of client insurer business relationship: Insurance managers must retain books and records for a client insurer for at least five years after the relationship ends.