Cayman Islands: CIMA Meets Regulatory Challenge In Insurance

As Cayman's captive insurance and nascent reinsurance, international insurance and life and annuity industry continues to evolve to meet the growing challenge of competition from onshore domiciles and continued soft market conditions, CIMA has responded by expanding the breadth of its regulatory capabilities. The regulator also recently published an extensive summary of the industry feedback relating the Rule on Corporate Governance in the insurance sector, which is seen as enhancing and underpinning the operations of insurers and reinsurers incorporated within the Cayman Islands.

In July 2016, Ruwan Jayasekera was confirmed as Head of the Insurance Supervision Division at CIMA. No stranger to Cayman, Jayasekera previously worked in the division between 2007 and 2011 before he returned to Sri Lanka, working for Allianz Insurance Lanka Ltd. He returned to CIMA in 2013 as Deputy Head of the Insurance Division and was installed as acting head in March 2016.

As Head of Insurance at CIMA, Jayasekera said his priorities will be to continue to follow CIMA's regulatory philosophy and as a team, continue to remain responsive, pragmatic and accessible to our licensees. "CIMA's regulatory philosophy has been to use a risk-based and proportionate approach to ensure that our licensees are appropriately supervised in accordance with international standards," he said.

"The Division has a very strong senior management team with substantial collective regulatory and captive and (re)insurance industry experience, supported by a group of analysts with relevant professional qualifications and experience. My task would be to integrate the experience and expertise of the team to ensure that we achieve CIMA's supervisory objectives.

"One of the competitive advantages of Cayman is its regulatory regime," Jayasekera added. "CIMA, as the primary financial service regulator, always tries to remain accessible, responsive, flexible, efficient, and transparent in our dealings with licensees and industry. Not many regulators in the world are easily accessible the way our licensees access CIMA! One of my priorities is to maintain these standards which CIMA has been maintaining for decades."

The insurance capability within CIMA was also bolstered by the appointment of Garth MacDonald to the Board of Directors in March 2016. MacDonald was the former CEO of Cayman Islands insurance company Island Heritage Group and Financial Services Minister Wayne Panton had previously indicated that he was seeking to add supplemental insurance expertise to the CIMA Board. CIMA Chairman Grant Stein commented at the time: "The recent addition of a Director who has over 20 years' experience in the insurance industry in domestic and international insurance and reinsurance has strengthened the Board in this area. This follows on from other recent appointments of individuals with strong backgrounds in banking, legal and compliance."

Jayasekera said he intends to continue to listen to the industry, which is one of the hallmarks of the financial services community in the Cayman Islands. "The captive insurance concept is well established and recognised in the insurance world today, and captive owners and service providers now put their captives to more sophisticated and innovative use than ever before. As Head of the Insurance Supervision Division, another priority is to listen to the captive industry and to be keep abreast of changes taking place in the captive/ insurance world globally and to find ways to accommodate sophistication through appropriate changes to our processes and procedures and, if necessary, recommend needed amendments to the regulatory framework."

"It is also one of my priorities to provide opportunities and exposure to my team to enhance their regulatory and technical knowledge in captives/(re)insurance, as the expertise and experience of my team are key to achieving that balanced and proportionate risk-based supervision."

The Cayman Islands continues to maintain a strong position in the captive insurance sector, second only to Bermuda in terms of the total number of captive insurers, while being the leading jurisdiction for both medical professional liability ('healthcare') captives and for group captives as well as catastrophe bonds.

"Recent market trends suggest that more and more (re)insurance buyers are seeing the benefits of owning or using captive insurance vehicles to take advantage of their risk mitigation and financing," Jayasekera said.

"Whilst this confirms that the captive insurance concept is well established and well accepted in the (re)insurance world, this has created competition for business due to emerging captive domiciles, especially in the United States. Yet, domiciles like Cayman which has been in captive business for decades still hold the advantage over new domiciles due to well established regulatory regimes and an experienced service sector."

Cayman has a lot going for it in terms of industry experience and expertise, with high quality insurance managers, auditors, attorneys, bankers, investment managers, as well as the professional attitude of CIMA's regulatory staff .

"These specialists have developed an incomparable amount of experience and expertise over the decades, which have made Cayman a leader in the captive insurance world," Jayasekera said.

"On the other hand, Cayman is not in competition for quantity or number of captives. The jurisdiction's vision is to grow through quality with the industry and regulators, as "Cayman Inc." have one common goal – to maintain the Cayman Islands' reputation for quality, integrity and being an adherent to international standards and best practices. Cayman has the necessary requirements to maintain its leadership in the captive market, even with stiff competition especially from emerging captive domiciles, since the jurisdiction's expertise, regulatory framework and regime, infrastructure and stability are hard to match."

Looking at the evolving legal and regulatory landscape, CIMA said Cayman always strives to meet international best practices and standards, whilst encouraging innovation and sophistication. CIMA is a founding member of the International Association of Insurance Supervisors (IAIS), the global insurance standard setter and the authority has been involved in various capacities, from executive committee to technical working groups, in the global standard-setting and implementation efforts of the IAIS.

"As a leading captive insurance jurisdiction, the Cayman Islands has a duty and responsibility to set very high standards and, because of this, achieving compliance with international standards has always been top priority for CIMA," Jayasekera said, adding that with more sophisticated applications for captives, regulatory frameworks do not remain static, due to the evolution of international standards and the business itself.

"In the last couple of years, CIMA has issued new standards, or revised a number of existing regulatory standards and rules, mainly as a result of changes made to international standards. CIMA will continue to assess its regulatory framework to identify areas needing further enhancements and do the needful. Whilst CIMA strives to maintain its regulatory framework to meet international standards, the Authority takes a principled, proportionate and pragmatic approach in adopting international standards to meet the jurisdiction's unique business requirements. Unlike traditional commercial insurers, captives are versatile risk-financing tools formed to provide greater risk management flexibility, and therefore it is important that captive regulatory frameworks remain modern, flexible and yet robust enough to keep pace with the dynamic captive 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.

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