Cayman Islands – Insurance Fact Sheet
Government Cayman is a British Overseas Territory with self-government.
Legal It has English common law supplemented with local statutes.
Taxation There is no income tax.
Currency There are no exchange controls. Cayman has its own currency CI$ with a fixed exchange rate of: US$1 = CI$0.82.
Transport Cayman has regular direct flights to and from USA and Europe.
Accommodation Cayman has a sophisticated hotel environment with golf courses.
Professionals Cayman is a major global financial centre and, as such, has many international accountants, actuaries and lawyers.
Captive Insurance Industry The Cayman Islands is the second largest captive insurance company domicile in the world after Bermuda. As at 31st December 2014, there were 76 captive insurance companies in the Cayman Islands including 140 segregated portfolio companies. Gross premiums were US$12.5 billion, having increased by 67% in the last six years from US$7.48billion, and assets under management were US$54.1 billion. 90% of all business comes from the USA and 45% relates to health insurance.
The Cayman Islands is the global leader for health care and medical malpractice captives.
Regulatory environment Cayman’s insurance activities are subject to the Insurance Law (2010 Revision), and regulated by the Cayman Islands Monetary Authority (CIMA), which has nineteen full time insurance staff.
Due to the size and mixed nature of the captive business in Cayman, the level of expertise needed to regulate it is much higher than that needed in other offshore jurisdictions. This experience and depth of resources means that CIMA in Cayman is well placed to process new business applications speedily and in a professional manner. There are few risks which CIMA has not seen over the years.
Fronting The confidence provided by the experience and regulatory regime developed by CIMA in Cayman has provided a comfort to fronting companies.
Licences Cayman’s captive companies operate under Class B insurers’ licences, of which there are three sub sections, Classes B(i), B(ii) and B(iii). These are addressed later.
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Insurance manager In Cayman the captive must appoint a licensed Insurance Manager to maintain its books and records. Due to the number of captives in Cayman, clients have a wide choice of captive manager.
Auditors Every licensed insurer must appoint an independent, approved auditor to report annually on the financial statements of the insurer. Cayman requires that the auditors be locally based, or at least that the accounts are signed off locally. As with the choice of managers, there is a wide choice of auditors in Cayman.
Directors In Cayman there is no requirement to appoint local directors or to have local board meetings. However, the regulator requests that the Directors visit the island every 18 months to 2 years for an informal chat. Local board meetings are often organised during these visits.
Licensing process Applications for a licence are made on the approved form and take approximately 4-5 weeks to process.
Minimum capital requirements (net worth) – The Insurance Regulations, 2012 – Schedule 1 [Net Earned Premium = NEP] Restricted Class B Licence Type of business Minimum capital Prescribed Capital Requirement (MCR) Requirement (PCR) Class B (i) General US$ 100,000 PCR = MCR > 95% related business Long Term US$ 200,000 PCR = MCR Composite US$ 300,000 PCR = MCR
Class B (ii) General US$ 150,000 10% of NEP to $5m > 50% related business Long Term US$ 300,000 5% of NEP for next $20m Composite US$ 450,000 2.5% of NEP > $25m
Class B (iii) General US$ 200,000 15% of NEP to $5m < 50% related business Long Term US$ 400,000 7.5% of NEP for next $15m Composite US$ 600,000 5% of NEP > $20m
Solvency margins - Cayman The solvency requirements above are designed to recognise that some captives are more risky than others. The risk-factor depends upon the percentage of related business that the captive writes. Related business is business originating from the captive's members or the members of any group with which the captive is related through common ownership or a common risk management plan, or as determined by CIMA.
Risk Management Framework. Each insurance company must have a risk management framework appropriate to its size, complexity and the nature of its risk exposures.
Set up Costs –US$25,000 estimate Set up consultancy fees and legal fees = $25,000 (Government $11,350, Incorp $3,650, Captiva $10,000)
Annual Costs – US$66,000 estimate Captive management fees - US$35,000, depends on the complexity of the company Audit fees - $20,000 approx Government fees (see below) – $11,000 approx Annual total - $66,000
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Annual costs
A full breakdown of Cayman costs is provided below:
Cayman Islands – Annual Fees
Exchange rate: US$1 = CI$0.82.
Registrar of Companies Incorporation & annual fees Capital US$
Insurance Licence Fees to CIMA Class B (i) CI$8,500 10,365.85 Class B (ii) CI$9,500 11,585.37 Class B (iii) CI$10,500 12,804.88 SPC cell fee (per cell) CI$250 304.88 Application fee = the first year’s annual fee is paid upon application, which is returned if the application is turned down.
Example 1 – Class B (i) captive with authorised capital of US$50,000
Example 1 – Class B (i) captive with authorised capital of US$50,000 Annual fees US$ Registrar of Companies 853.66 Insurance licence fee (CIMA) 10,365.85 Total 11,219.51
Example 2 – Class B (i) Segregated Portfolio Company with $50,000 capital & two cells
Annual fees US$ Registrar of Companies (ROC) 853.66 SPC (ROC) fee 2,439.02 Cells (ROC) - $365.85 x 2) 731.70 Insurance licence fee (CIMA) 10,365.85 Cells (CIMA) - $304.88 x 2) 609.77 Total 15,000.00
Conclusion Cayman has the proven track record and experience to provide clients with a safe and stable working environment at competitive prices.
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