Rule on Corporate Governance

Supplement No. 6 published with Extraordinary Gazette No. 45 dated 8 June, 2016.

The following commentary has been circulated by Solomon Harris and is reprinted with their kind permission.

As part of its continuing drive to ensure Cayman Islands (‘Cayman’) corporate governance meets or exceeds the latest international standards, on 8 June 2016 the Cayman Islands Monetary Authority (‘CIMA’) introduced The Rule – Corporate Governance For Insurers (‘R-CGI’ or ‘Rule’). This imposes specific obligations on insurers regulated by CIMA under the Insurance Law, 2010 and is the first time insurers have been subject to a Rule on corporate governance rather than a Statement of Guidance (‘SOG’).

Rule not SOG

The decision to introduce a rule rather than an insurance specific SOG comes from a requirement of the current international insurance supervision standard that regulators are able to enforce appropriate corporate governance (see below). Whereas SOGs provide guidance for licensees to help them comply with the relevant laws, rules and regulations, rules are clear and precise directives on matters which CIMA considers are essential for the prudential supervision of regulated entities. They differ from SOGs in that they create binding obligations, breach of which may lead to CIMA imposing a fine or taking other regulatory action according to its Enforcement Manual, and/or powers given to it by the Insurance Law, 2010 and the Monetary Authority Law (2013 Revision).

Application and Status

The Rule applies to all insurers, including Portfolio Insurance Companies, but not to Class ‘A’ External insurers. It is to be read in conjunction with the Rule on Risk Management for insurers; the Rule on Internal Controls – Insurance; and the SOG on Internal Controls. It was the subject of a Private Sector consultation in 2015. (For more detail, see our piece Cayman corporate governance rules: CIMA launches private sector consultations.)

Written Framework

Insurers will now be required to put in place a written corporate governance framework which provides for sound and prudent management and oversight of the Insurer’s business and which adequately recognizes and protects the interests of policyholders. The framework should be commensurate with the size, nature and complexity of the insurer’s business. Many insurers are likely to have much of what is required in place already, particularly where there is a corporate governance framework at the parent level, but the Rule creates an enforceable obligation with which insurers must comply.

What the framework must address

As a minimum the framework must address the following:

  1. The objectives and strategies of the insurer;
  2. Appropriate allocation of oversight and management responsibilities;
  3. Structure and governance of the Governing Body (i.e. the Board of Directors);
  4. Independence and objectivity;
  5. Collective duties of the Governing Body;
  6. Duties of individual members of the Governing Body;
  7. Appointments to the Governing Body;
  8. Delegation;
  9. Conflicts of interest;
  10. Risk management and internal control systems (pursuant to the Rule on Risk Management for Insurers, Rule on Internal Controls – Insurance and SOG on Internal Controls);
  11. Remuneration policy and practices;
  12. Reliable and transparent financial reporting;
  13. Transparency and communications; and
  14. Duties of senior management.

Current International Standards

Prior to R-CGI, insurers were subject to the Statement of Guidance on Corporate Governance (‘SOG -CG’) and which applied to the governing bodies of all Cayman regulated entities and not just insurers. The Rule is more detailed and comprehensive than the SOG-CG, and reflects CIMA’s focus on the importance of robust corporate governance.  As well as setting out CIMA’s minimum expectations for an appropriate and effective system of corporate governance for insurers, it means CIMA can enforce the requirement that insurers establish and implement an appropriate corporate governance framework, a key requirement of the current international standard, the Insurance Core Principles 7 (‘ICP7’), set by the International Association of Insurance Supervisors.

Solomon Harris

For further information on how the Rule may impact any insurer with which you are involved, please contact us on