The Cayman Islands legislature recently enacted The Insurance
(Portfolio Insurance Companies) Regulations, 2015 and related
sections of The Insurance (Amendment) Law, 2013.
To address market demand to broaden the statutory framework and
confer upon an insurer incorporated as a Cayman Islands Segregated
Portfolio Company (SPC) more flexibility with
respect to quota sharing, risk pooling and reinsurance. The new law
is also expected to improve the tax position of segregated
portfolios under US federal law and enhance the market recognition
of Cayman Islands SPCs within the insurance and reinsurance
New or existing insurers (other than Class A Insurers) operating
as SPCs are now able to incorporate one or more of their segregated
portfolios by establishing one or more "portfolio insurance
companies" (PICs) underneath the SPC. In
essence, a PIC is a Cayman Islands exempted company that is a
subsidiary of the SPC under which it is established but is related
to a particular cell of such controlling SPC.
A PIC will be regulated by the Cayman Islands Monetary Authority
(CIMA) and will be subject to initial filing and
registration fees. It will not, however, require a CIMA license
separate to that of the SPC under which it is established. Existing
SPCs wishing to establish a PIC and transfer the business of an
existing cell to such PIC may take advantage of a statutory
novation process as part of a fast-track registration process with
CIMA. If CIMA approves the application, a Certificate of
Registration will be issued to the PIC.
Ongoing obligations include the requirement to continue to
operate under the conditions submitted to CIMA upon registration,
maintaining the prescribed minimum solvency and capital levels and
complying with annual filing requirements.
A PIC will operate as a separate legal entity under established
principles of corporate law.
the ability to contract with other cells of the SPC;
substantially reduced risk of comingling of the SPC's
reduction in apparent or real conflicts of interest by enabling
a separate board of directors to operate each PIC, distinct from
the board of the controlling SPC;
potentially enabling each PIC to be recognised as a separate
legal entity for purposes of US federal tax law, thereby allowing
tax elections to be made under its own federal tax identification
enabling a single PIC to be wound up without affecting other
cells or PICs of the SPC or the SPC itself;
improving market recognition of Cayman Islands insurers
operating as SPCs by establishing the concept of incorporated
facilitating transition to a standalone insurance company;
providing the ability to issue participating shares to
investors with an economic interest in the PIC.
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.
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