A very warm welcome to our fifth issue of Conyers Coverage. This issue is a roundup of recent legal and regulatory measures affecting the insurance industry. Among a number of items, Rob has prepared an update on Cayman's legislative regime for Virtual Asset Service Providers. Sarah, a very welcome new team member whom we profile this issue, provides an important reminder that licensees need to be mindful of the application of Cayman's regulatory regimes to their operations and shares details on how we can assist. Michael addresses key items to consider in insurance financing transactions and one of our insurance disputes lawyers, Róisín Liddy-Murphy, gives an overview of the considerations (re)insurers need to take before insuring 'morally hazardous' businesses such as those involved in the production and supply of cannabis.
We hope that you find these updates helpful. Please reach out to one of the team for any clarifications or specific assistance needed.
Finally, a big congratulations to the winners of our first annual Conyers Classic Volleyball Tournament! More details and pics below.
As always, we welcome your comments or article suggestions for future issues, and please don't hesitate to get in touch if you would like to contribute to future editions of Conyers Coverage.
Enjoy the read!
Why Insurers Should Address Regulatory Requirements at Launch
Economic Substance, FATCA, CRS, AML, Beneficial Ownership, Country by Country Reporting – one thing is clear to everyone in the industry, the Cayman Islands regulatory landscape is growing increasingly complex.
To add to the complexity, the legislation, regulations and guidance under these regimes are being updated on a very frequent basis. The AML regulations alone were amended three times in 2020.
In order to understand the obligations that a company will have under these regimes, and to ensure compliance from day one, it's important to consider the company's regulatory classifications at the outset.
We have been assisting insurance clients with this by providing a memorandum which sets out a short summary on each of the regimes, and the application of each to the company. We then recommend including this memorandum in the board pack for the first substantive board meeting, to ensure the directors have properly considered the regimes and the company's classifications under each. These classifications should then be addressed in the board minutes.
For the vast majority of Class B(iii) insurers, we are now routinely assisting with providing regulatory memorandums at launch stage, to help them navigate their obligations and classifications under each of the regimes.
Please do reach out to one of the contacts listed below or your usual Conyers lawyer if you would like to learn more about how we can assist.
The Cayman Islands has long been a hub for captive and reinsurance entities. These entities often write or reinsure traditional property and casualty risks emanating from various underlying businesses. Insurance is international and cross-border with the globalisation of insurance products and markets evolving at a rapid pace. As these products and markets evolve so does the diversity of the types of business seeking to avail themselves of captive and reinsurance structures. However, difficulties can arise when an underlying business is engaged in activities that are unlawful in the Cayman Islands such as the production and supply of cannabis. In these situations, insurers and their managers need to satisfy themselves as to whether any Cayman Islands law is contravened by the captive writing traditional risks or a reinsurance entity providing reinsurance for an underlying business that is engaged in the production and supply of cannabis in a jurisdiction outside the Cayman Islands. This article discusses some the key statutory provisions that would need to be considered.
As a leading jurisdiction for the domicile of captive insurance companies and, more recently, reinsurance companies, the laws of the Cayman Islands have a central role and require careful consideration when such insurance vehicles seek to approve and execute the various commercial arrangements which they require.
One commonly seen transaction is the establishment of a credit facility or letter of credit arrangement between the insurance vehicle and a financial institution or lender (either based in the Cayman Islands or in North America) (a "Financing Arrangement"). Such Financing Arrangements assist insurance vehicles in a variety of ways and smooth issues that may otherwise cause wrinkles in their cross-border business models.
This article aims to give a short overview of how such transactions are documented and what issues commonly arise in executing these deals.
We hope you find this combined Cayman Islands and Bermuda review of recent developments in the jurisdictions insightful and informative.
An Update on Cayman's Legislative Regime for Virtual Asset Service Providers
Last year Conyers lawyers Nick Pattman and Rob Humphries penned an article giving an overview of Cayman's new Virtual Asset (Service Providers) Act, 2020 (the "VASP Act") prior to the commencement of the legislation last year. The VASP Act provides a framework for the regulation and oversight of virtual asset service providers in a rapidly evolving digital asset market place.
The VASP Act was partially brought into force on 31 October 2020 and amended by the Virtual Asset Service Providers (Amendment) Act, 2020 as of 15 January 2021. Subsequently, the Virtual Asset (Service Providers) (Savings and Transitional) Regulations, 2021 have been brought into effect which provide for certain transitional provisions and introduce a phased implementation of the requirements for licensing or registration of virtual asset service providers under the VASP Act.
The regulatory framework is now being implemented in two phases. Phase one focuses on anti-money laundering ("AML") and countering the financing of terrorism ("CFT") compliance, supervision and enforcement, and other key areas of risk. Under phase one, entities engaged in or wishing to engage in virtual asset services must be registered with the Authority under the VASP Act. Entities wishing to engage in virtual asset services, already subject to the Cayman Islands Monetary Authority's supervision under another regulatory law, must notify (in the case of licensees) or register with (in the case of registrants) the Authority under the VASP Act. Those who were already conducting such business should have given notice or registered with the Authority on or before the cut-off date for doing so on 31 January 2021. Phase two refers to the licensing and virtual asset issuance approval process that will begin when the appropriate clauses and aspects of the VASP ACT come into full force and effect in due course.
Phase one (registration or notification) targets three groups:
- Entities wishing to perform virtual asset services for the first time ("New Market Entrants");
- Entities providing virtual asset services prior to the commencement of the VASP Law ("Pre-Existing Service Providers"); and
- Existing Authority licensees that provide or propose to provide
virtual asset services ("Other Authorized
Registration or notification can be done through the VASP Application Form on the Authority's REEFS online platform. As part of the registration or notification process, entities are also required to complete an AML/CFT form which is also available on REEFS. Please feel free to reach out to Nick Pattman, Rob Humphries or your usual Conyers contact if you require any advice in relation to the new VASP Regime.
Sarah Farquhar is an Associate in the corporate department and joined Conyers in July 2021. She specialises in regulatory and compliance matters, and as Conyers expands our regulatory services offering in all areas, Sarah will be an integral part of our market-leading insurance and reinsurance practice.
Conyers Classic Volleyball Tournament
The quality of pure volleyball talent on display at our May tournament was amazing. Congratulations to our tournament winners Class Aces: Isaac Espinoza, Annette Espinoza, Stephen Gould and Damien Austin. On their road to victory, our tournament champions took down some the tournament favourites (Aon and Conyers) with ease. Our runner ups, GCM, had an absolutely brilliant run, battling their way through almost every team in the tournament to bring us an epic two match championship showdown.
For those who were knocked out early, we expect to see you out on the public beach courts training for next year. See you then!
- CIMA announces its Q2 2021 insurance
We're pleased to note that Conyers continues to assist a sizeable majority of all new licensees registered quarterly
- Kara Ebanks appointed as Deputy Head of CIMA's insurance division
- Ministry of Financial Services launches Beneficial Ownership Consultation
- Promotions and moves at Aon:
- Melissa Thomas – Managing Director
- Howard Byrne – Chief Commercial Officer, Aon Insurance Managers (Cayman) Ltd. and Aon Risk Solutions (Cayman) Ltd.
- Maggie Papadopoulos – Director
- Ghislain Ghyoot – Director
- Joni Steffen – Senior Vice President
- Mike Scott – Vice President
- Nate Gemmitti – CEO of fixed annuity insurer funded by Investcorp
- Delia McMahon – General Counsel of Knighthead Annuity
- Mike Bowden – leaves Marsh to pursue personal projects outside the industry
- Yohann Regnard – moves to Horseshoe
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.