Obtain an Internal Insurance Company Licence in the Cayman Islands

Obtaining an internal insurance company licence in the Cayman Islands means creating a regulated captive structure for insuring the risks of a group, managing losses, working with reinsurance and accumulating reserves within an international business. Such a mechanism is used by holdings, production groups, medical networks, logistics operators and technology companies that require their own insurance instrument under the supervision of CIMA — the Cayman Islands Monetary Authority.

The Cayman Islands remain one of the largest world centres of captive insurance. According to the statistics, 694 insurers of the Class B category out of 722 international insurance organisations operate in the jurisdiction. The obtaining of a Cayman captive insurance licence is not intended for working with a wide local audience. This regime is intended for activity outside the internal market of the islands.

Obtaining an Internal Insurance Company Licence in the Cayman Islands: What Class B Captive Insurance Is 

The Class B Insurer Licence is issued by CIMA on the basis of the Insurance Act. A captive insurance licence in the Cayman Islands can be obtained for general or long-term insurance or a mixed model. 

A captive insurer is an insurance organisation created to cover the risks of one's own business or a group of connected companies. The main question for CIMA is connected with the origin of the insurance premiums. The regulator analyses whether the funds come predominantly from connected persons or whether the structure is oriented towards the external market. If the insurance scheme services the parent company and subsidiary organisations, this usually concerns the classic captive model.

The Subcategories of Class B

The subcategory depends on the share of connected premiums in the total volume of the insurance portfolio. Class B(i) applies if no less than 95% of the net written premiums comes from the connected business. This is the most widespread option for holding structures. Such an organisation insures the risks of its own group and practically does not work with third-party clients.

Class B(ii) is used if more than 50%, but less than 95% of the premiums relates to connected participants. The obtaining in the Cayman Islands of a captive insurance licence of this subcategory permits an external portfolio. At the same time, the main part of the operations still remains within the group.

Class B(iii) applies if the connected premiums constitute 50% or less. When arranging in the Cayman Islands an insurance company licence for internal risks, the regulator requires a deeper disclosure of:

• the insurance products;

• the target markets;

• the sales channels;

• the brokerage schemes;

• the reinsurance programme;

• the pricing policy;

• the capital management model.

When a Group Needs a Captive Insurance Company in the Cayman Islands

The obtaining of a group insurer licence in the Cayman Islands is used for the centralisation of insurance risks within an international business. Through a captive insurer, the following are often covered:

• professional liability;

• property risks;

• cyber risks;

• product liability;

• employees' medical programmes;

• deductibles and retentions on large insurance programmes.

A captive makes it possible not to transfer the whole risk to an external insurer. Part of the potential losses remains within the corporate structure. The obtaining of a captive insurance licence in the Cayman Islands provides the possibility to control the limits, to build one's own system of reserving and to manage the group's insurance expenses. A captive insurer may transfer part of the risk to professional reinsurers. The business plan usually discloses:

• the reinsurance programme;

• the coverage limits;

• the own retention;

• the ratings of the reinsurers;

• the collateral schemes;

• the procedure for the settlement of losses.

Obtaining a Captive Insurance Licence in the Cayman Islands: the Main Requirements

The application for obtaining an insurer licence for internal risks in the Cayman Islands is usually submitted before the registration of the organisation or simultaneously with the corporate arrangement. It is also required to appoint a local insurance manager. This specialist interacts with CIMA, supports the submission of reporting and participates in the communication with the supervisory authority. Additionally, an approved auditor is required.

Within the framework of the licensing of captive insurance companies in the Cayman Islands, CIMA conducts a check of the business reputation, qualification and financial stability. It extends to the directors, managers, shareholders and beneficiaries.

The ownership structure must disclose the ultimate beneficiaries with a share of 10% and more. Additionally, the intermediate holding and operational organisations between the captive and the actual owners are indicated. A non-transparent chain of ownership often becomes the reason for delays or additional requests on the part of CIMA.

The regulator also checks the applicant for compliance with the AML/CFT criteria. Additionally, sanctions control is analysed. For obtaining a captive insurance licence in the Cayman Islands, it is also necessary to present the internal procedures for the identification of clients, the sources of origin of the funds and the risk management system.

The Minimum Capital Investments

The size of the capital depends on the subcategory of the licence and the type of insurance activity. CIMA assesses the stability of the entire insurance model. The minimum requirements for the contribution of funds (MCR) are indicated in the table:

For Class B(i), the prescribed capital requirement (PCR) usually coincides with the MCR. For B(ii) and B(iii), the calculation depends on the net earned premium (NEP). The higher the insurance volume, the more capital it is required to maintain.

For B(ii), the following formula applies:

• 10% of the NEP up to the first 5 million USD;

• 5% of the additional NEP up to 20 million USD;

• 2.5% of the remaining NEP over 20 million USD.

When obtaining in the Cayman Islands a captive insurance licence of subcategory B(iii), higher coefficients are used:

• 15% of the NEP up to the first 5 million USD;

• 7.5% of the additional NEP up to 20 million USD;

• 5% of the remaining NEP over 20 million USD.

The minimum threshold is not always considered sufficient for arranging an insurer licence for internal risks in the Cayman Islands. CIMA is entitled to establish an additional regulatory requirement for capital taking into account:

• the insurance programme;

• the limits of liability;

• the level of retention;

• the reinsurance scheme;

• the reserves;

• the collateral mechanisms;

• the overall level of risk.

How to Obtain a Class B Captive Insurance Licence in the Cayman Islands

The procedure for registering a corporate insurer licence in the Cayman Islands includes the following stages:

Conclusion

Our company is ready to offer a full spectrum of services in obtaining an internal insurance company licence in the Cayman Islands. We carry out the in-depth preparation of the insurance model, the support of the interaction with CIMA, the structuring of the corporate scheme and the control of the procedure up to the issuance of the permit document. This reduces the risk of additional requests, errors in the financial calculations and delays in the agreement of the project.