With the publication of the Insurance (Portfolio Insurance Companies) Regulations, 2015 and the Insurance (Amendment) Law 2013 (Commencement) Order, 2015, insurers (other than Class A Insurers) formed as segregated portfolio companies (SPCs) can enjoy the advantages of portfolio insurance companies in the Cayman Islands.

As of January 16, 2015, a new or existing SPC is able to incorporate one or more of its segregated portfolios by establishing a "portfolio insurance company" (PIC) under the SPC. The PIC would then undertake the relevant insurance business without the need for a separate licence and, unlike a traditional segregated portfolio, the PIC will be incorporated as a separate legal entity.

The main advantages of the PIC are:

  • the ability to contract with other PICs within the same SPC, facilitating reinsurance, quota sharing and pooling
  • each PIC is a separate legal entity with its own board of directors, permitting governance flexibility and reduced risk of comingling assets; and
  • a single PIC can be wound up with no effect on its controlling SPC or other PICs

The Regulations

The Regulations address in detail the requirements for registration of a PIC, the fees payable, the margin of solvency, and the minimum capital and prescribed capital requirements. With certain exceptions, each PIC is required to submit audited financial statements and an annual declaration including an actuarial valuation of its assets and liabilities (including loss expense provisions) and a certificate of solvency. Full details of the Regulations are beyond the scope of this alert, but in our view the regulatory structure for PICs is commercially sensible, flexible and balanced. For detailed information, contact any member of Appleby's Cayman corporate team or the contacts set out below.

The PIC regime is an example of the Cayman Islands government working closely with industry stakeholders in the private sector to respond to clients' needs and increase the competitiveness of the jurisdiction. The PIC is a welcome addition to Cayman's thriving insurance industry.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.