Insurance (Capital and Solvency) (Class A Insurers) Regulations, 2012

Summary

These are Cayman Islands Monetary Authority (CIMA) regulations made under the Insurance Law, 2010 that set out the capital and solvency framework applicable to Class A insurers (both local insurers and external insurers carrying on domestic/Cayman business). They define key terms (available capital, minimum capital requirement, prescribed capital requirement, policy liabilities, asset factors, etc.) and prescribe how insurers must calculate the capital they must hold against their assets, subsidiaries, unpaid claims/unearned premiums, policy liability margins, catastrophe risk and foreign currency exposure.

Capital and Trust Requirements

• Trust assets: External insurers writing domestic business must hold trust assets in the Islands equal to at least the prescribed capital requirement.
• Available capital: Both local and external insurers must maintain available capital above prescribed minimum and prescribed capital requirements, calculated quarterly using standardized asset factors (Schedule 1), a capital requirement template (Schedule 2), and margin tables for unpaid claims/unearned premiums (Schedule 3).
• Enhanced requirement: CIMA retains power to impose an enhanced prescribed capital requirement following its own inspection.

Ongoing Compliance Obligations

• Record-keeping: Insurers must record and retain their quarterly capital calculations.
• Notification: Insurers must notify CIMA promptly if they fail to meet capital requirements.
• Remedial directions: Insurers must comply with any remedial directions CIMA imposes.
• Transitional period: Existing licensees have eighteen months from the regulations' coming into force to come into compliance with the trust and capital requirements.

The document is a foundational solvency regulation for Class A insurers and remains a key ongoing compliance reference, though the text itself does not clarify its current amendment/consolidation status.

Key obligations

• A class A insurer must maintain adequate financial resources to meet its insurance business commitments and manage its risks as required by the Law.
• A class A external insurer carrying on domestic business must place and at all times maintain, in trust with an Authority-approved person in a segregated account at an Islands 'A' licensed bank, assets at least equal to the prescribed capital requirement.
• A class A local insurer's available capital must at all times exceed the minimum capital requirement and, unless otherwise approved by the Authority, exceed the prescribed capital requirement.
• If the Authority sets an enhanced prescribed capital requirement, the insurer's available capital must equal or exceed it until the Authority directs otherwise.
• At the end of each quarter, a class A insurer must calculate and record its minimum capital requirement, prescribed capital requirement, and (if applicable) enhanced prescribed capital requirement, using net written premium for the trailing twelve months, in the Schedule 2 format.
• The quarterly calculations must be maintained at the insurer's principal place of business in the Islands for five years and produced to the Authority on request by a specified date.
• An insurer must notify the Authority within thirty business days of the end of each quarter if it fails to meet the minimum, prescribed, or enhanced prescribed capital requirement.
• Where an insurer has notified the Authority of a shortfall, it must comply with any resulting requirement or direction from the Authority (e.g., a remedial action plan) within the time period specified by the Authority.
• An insurer must hold capital for subsidiaries equivalent to book value of investments in non-regulated-financial-institution subsidiaries/associates, and must perform consolidated capital calculations for subsidiaries that are regulated financial institutions.
• Insurers must apply the prescribed asset factors (Schedule 1) consistently, using one recognized rating agency's ratings where possible, when calculating capital held against assets.
• A class A insurer writing general business must apply a catastrophe risk margin and must notify the Authority of the method chosen (default or model-generated) and obtain prior approval before changing methods.
• A class A insurer writing long-term business must maintain a margin of at least 2.5% of discounted policy liabilities (excluding pension and annuity reserves).
• A factor of 5% must be applied to net assets or liabilities denominated in a currency other than Cayman Islands dollars, US dollars, or a currency fixed to the US dollar.
• An existing licensee not in compliance with regulations 5 or 6 at the coming into force of these Regulations must achieve compliance within eighteen months of that date.

Applies to

Class A insurers, local insurers, external insurers

Deadlines

• within thirty business days of the end of each quarter: Insurer must notify the Authority if it fails to meet the minimum capital requirement, prescribed capital requirement, or enhanced prescribed capital requirement.
• at the end of each quarter: Insurer must calculate and record its minimum capital requirement, prescribed capital requirement, and enhanced prescribed capital requirement (if applicable) in the Schedule 2 format.
• five years from completion: Quarterly capital calculations must be maintained at the insurer's principal place of business in the Islands for five years.
• eighteen months of the coming into force of these Regulations: Existing licensees not in compliance with regulations 5 or 6 must come into compliance.