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."


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

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

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”

Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.