Cayman Islands: Cayman Islands - The Ne Plus Ultra Captive Domicile?

Being in first place certainly has its advantages. First place means you have won the race, reached the pinnacle, accomplished the objective. But, despite being one of the top financial centres in the world, the Cayman Islands is ranked as only the second-largest captive insurance domicile.

Perhaps, then, it is because of this second place ranking that the Cayman Islands continues to innovate, streamline and enhance efficiencies in the captive business. With a robust and sound regulatory environment, the Cayman Islands provides an ideal platform on which to conduct business within the captive insurance industry.

Pillars of this platform include:

Legislative Innovations

The new Insurance Law, 2010 of the Cayman Islands enhanced the application of a risk-based approach to the regulation of different types of captives. This common sense and practical method allows factors such as the amount and degree of third party risk to be taken into consideration by the regulator when setting capital requirements for captive insurers.

As a further innovation in the Cayman Islands' insurance industry, in March 2013, the Insurance (Amendment) Law was enacted which provided for Segregated Portfolio Companies (SPCs) to incorporate their individual cells for the first time as Portfolio Insurance Companies (PICs). Because each PIC has a separate legal identity and a separate board of directors, the new legislation will make it possible for PICs in a SPC to transact business in their own right and even contract among themselves.

A PIC will continue to be regulated by the Cayman Islands Monetary Authority (CIMA) but will not need its own insurance licence for so long as it remains a PIC. Instead, it will operate under the umbrella of the licence held by the SPC insurer which controls it. The legislation provides for a straightforward registration process with CIMA for each PIC. The PIC legislation is anticipated to be brought into force once necessary amendments have been made to the Insurance Regulations.

Regulatory Streamlines

The European Union's Solvency II Directive was introduced in an effort to manage the risk of insolvency by insurers by providing for mandated minimum levels of required capital. Solvency II has been criticised by think tanks such as the World Pensions Council, which argued that by adopting the Solvency II recommendations, European legislators actually forced insurance companies and their regulators to rely more on assessments of credit risk by private rating agencies. Thus, part of the public regulatory authority was abdicated in favour of private rating agencies. Additionally, the calibration of the standard formula for assessing equity risk has been criticised as unreliable.

The Cayman Islands has currently opted not to adopt Solvency II equivalency. Instead, it has maintained a 'wait and see' approach and is carefully assessing beforehand the implications for Cayman licensed insurers.

FATCA – Taming the 800-Pound Gorilla

The spectre of the US Foreign Account Tax Compliance Act (FATCA) has been looming over the international financial community for a number of years now. Although FATCA is actually US domestic legislation implementing a new tax information regime, the legislation will have a decidedly extra-territorial effect on foreign financial institutions, potentially including captive insurers. However, in order to limit FATCA's adverse impacts and provide certainty, the Cayman Islands government recently concluded negotiations on a Model 1 intergovernmental agreement (IGA), and a new tax information exchange agreement (TIEA) to supplant the current one signed in November 2001. This IGA will eliminate the burden for each foreign entity to comply with FATCA or face a 30% withholding tax on US source payments. Under the terms of the IGA, certain Cayman Islands financial entities will report the required tax information directly to the Cayman Islands Tax Information Authority, which will then automatically exchange this information with the US Internal Revenue Service.

Tax Transparency

In addition, the Cayman Islands have executed TIEAs with 31 different sovereign nations. To demonstrate its continuing commitment to tax transparency, the Cayman Islands government formally asked the United Kingdom to extend its membership in the Organisation for Economic Co- Operation and Development's (OECD). The Islands' transparency was acknowledged by the OECD's latest Global Forum Peer Review report in April 2013. Cayman was hailed for a "robust and transparent" legal and regulatory regime. Its financial industry was lauded as having a "clear and efficient system" for releasing information, with a "well- organised, well-resourced and adequately staffed" process for exchanging information. UK Prime Minister David Cameron recently acknowledged the Cayman Islands' progress in moving beyond its 'tax haven' reputation saying: "I do not think it is fair any longer to refer to any of the overseas territories or crown dependencies as tax havens. They have taken action to make sure that they have fair and open tax systems."

Conclusion

The Cayman Islands appears well placed to continue its growth in the captive insurance space. The jurisdiction has become quite adept at learning what clients want and has demonstrated its willingness to adopt innovative legislation designed to meet those needs. Taken together with a robust yet flexible approach to regulating its captive insurance industry, combined with high levels of transparency, the Cayman Islands is unlikely to remain in second place very long.


About the Authors

Samuel Banks is an associate at Appleby and a member of the Insurance and Corporate Finance teams. His practice includes banking, corporate finance, insurance, asset finance, and mergers and acquisitions. Samuel is actively engaged in all aspects of Insurance Law and has advised on some of the largest insurance transactions in the jurisdiction

Simon Raftopoulos is a partner at Appleby and a member of the Insurance and Corporate Finance teams. He represents clients on large insurance transactions as well as private equity and fund finance, joint ventures, mergers, acquisitions, leveraged buyouts, initial and secondary public offerings, structured finance, asset securitisations and private placements of equity and debt securities.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Cayman Finance
Cayman Finance
Cayman Finance
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Cayman Finance
Cayman Finance
Cayman Finance
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions