Setting Up
Whether you are looking to establish a captive insurance company, a reinsurance business or launch a new ILS transaction in the Cayman Islands, this is your online destination for everything you’ll need to know about getting started.
Attractive for International Insurance
In addition to outlining what makes Cayman so attractive to the international insurance marketplace, this section contains key information on the set up process, where Cayman differentiates itself from the completion and crucially, what our clients think about us. You can also get acquainted with all the benefits of establishing operations in the Cayman Islands, as well as the legislation that makes Cayman such an appropriate domicile.
Award Winning Domicile
The Cayman Islands’ reputation for excellence in captive insurance has been recognised a number of times by leading industry publication Captive Review. The US Captive Services Awards publication, has consistently ranked the Cayman Islands a top Captive Domicile for many years.
Why Cayman
- A wealth of industry experience among the service providers and the regulator, the Cayman Islands Monetary Authority (CIMA)
- Highly developed professional services, including insurance managers, lawyers, bankers and accountants
- Professional, sound regulatory environment, including appropriate capital requirements, investment restrictions and the ability to write third-party business
- Modern company and captive insurance legislation, including world standard anti-money laundering laws
- Stable political and economic environment
- First class infrastructure, including communications and air service
- Tax neutral – no income, capital gains or other taxes
- No exchange controls, so business can be transacted in any major currency
- Access to the world’s major reinsurance markets
Form a Captive
- Select a Cayman insurance manager
- Negotiate fronting and reinsurance arrangements (as necessary)
- Prepare the CIMA license application with assistance from the insurance manager
- Meet with the Insurance Division of the Cayman Islands Monetary Authority to discuss the proposed captive
- Submit the completed application
- Completed license application form
- The business plan, which includes:
- Rationale for formation
- Ownership and management structure, including proposed capitalisation
- Description of proposed insurance programs, including limits and retentions supported by recent actuarial analysis
- Details of any fronting and reinsurance arrangements
- Details of claims administration
- Description of loss reserving methodology
- Description of investment and dividend policy
- Financial projections for a three-year period
- Acceptance letters from an insurance manager and auditor in the Cayman Islands
- Letter of undertaking as to minimum capital (usually from shareholder)
- Personal questionnaire, references, and police clearance certificates or equivalent for managers, shareholders, directors and officers
Form a Reinsurance Company
Form an Insurance Linked Security
Benefits
- Lower costs for administration, claims settlement and loss control. Absence of state and federal taxes
- Risk management benefits- By demonstrating a better loss history than the industry average, lower premiums can be achieved
- Earn investment income on premium payments
- Conduct open market insurance operations for profit
- Access to reinsurance market
- Tax minimisation or deferral through properly structured and adequately capitalised captive insurance arrangements
- Sensible and appropriate, commercially focused regulation
- Relatively low licensing costs
- Collaborative local industry partners
- Tax neutral framework – No tax on corporate profits
- Deep pool of industry talent and support services
- Robust AML legislation
- Aligned with North America’s National Association of Insurance Commissioners standards
- Cayman has been involved in Cat Bond market since inception in 1990s
- Deep expertise of Cayman insurance managers and related service providers
- All Cayman ILS deals are fully funded and collateralised
- No requirement for additional regulatory capital layers – Minimum capitalisation of $500
- Collaborative regulator that works with clients to achieve objectives.
- Efficient licensing process
- Flexible and innovative corporate structures
- Efficient liquidation process
Legislation
The Cayman Islands has been at the centre of the international insurance industry since the formative years* of the early 1980’s and for over 40 years has developed a reputation for integrity and innovation. As its regulatory system evolves, Cayman has become an industry leader attracting insurance business from all over the world. As a testament, the Insurance Managers Association of Cayman has over 550 members and Cayman is considered by many to be the most complete international financial center with the corresponding depth of expertise. *The Cayman Islands Insurance Law was passed in 1979.
What makes Cayman so attractive?
Client Testimonial
With depth of experience across all sectors, Cayman has strong capabilities in healthcare captives, group captives and more. The unique blend of financial services laws and regulations, combined with flexibility in corporate operations and an approachable supportive regulator, has made the Cayman Islands a global leader in international financial services.
What Makes us Special
Take a look at this video to understand why the businesses basing their insurance operations in the Cayman Islands, wouldn’t be anywhere else.
If you are looking to domicile your captive in the Cayman Islands, what are the next steps to take? Here’s everything you need to know about getting started.
Get Started With Captive Insurance
The first phase of any successful captive is to prepare a complete feasibility analysis. This exercise will review the current insurance programme and determine where it is most advantageous to use a captive.
The second phase is the business plan, which looks at risk retention levels, limits and types of coverage, as well as the structure of the programme, whether it will be fronted or direct.
If your business plan makes sense and you are ready to establish a captive in Cayman, the process is relatively simple and licensing can take just four to six weeks.
Step by Step – New Captive Insurance Companies
The Application Form – New Captives
The application should include the following:
Incorporation and Approval
Incorporation of the company takes place through the General Registry, which normally takes five business days from the submission of documents. It is usually only done after the insurance license has been approved in principle.
See the Captive Insurance in the Cayman Islands Handbook sponsored by KPMG for more information.
Form a Reinsurance Company
The first step in setting up a reinsurance company in the Cayman Islands is to make a formal application to the Cayman Islands Monetary Authority for a Class D Insurer’s Licence, which must be made from a company incorporated in the Cayman Islands. The company structure will typically either be an Exempted Company or a Segregated Portfolio Company (SPCs), which can incorporate separate cells or Portfolio Insurance Companies (PICs).
Regulatory Requirements
Among other requirements, detailed on the application form are at least two directors that have been approved by CIMA, a physical place of business in the Cayman Islands and the appointment of an auditor, also approved by the regulator.
A comprehensive three year business plan is also required as part of the application. Minimum capital requirements for Class D reinsurance companies are $50 million, whether proposed business is general, long term, such as life insurance, or a combination of both.
The Licensing Process
Once the application has been submitted it will be reviewed by the Insurance Supervision Division at CIMA. Questions will be asked if needed and once they are satisfied with the proposal, a letter will be issued to allow incorporation of the company. As submission is then made for a license and the overall process takes between one and four weeks.
To form an entity to issue Insurance Linked Securities (ILS) such as catastrophe bonds, an application will be made for a Class C Insurance license from the Cayman Islands Monetary Authority.
Class C License Application
The Class C license allows the issuance of Cat Bonds, where insurance business is undertaken through the use of reinsurance. Importantly, the obligations of the Class C license holder are collateralised and limited in recourse to its funding sources or the proceeds of its funding sources.
There is no requirement for license holders to have additional regulatory layers of capital in place and there is a minimum collateral requirement of $500. The Class C license fee is currently CI$ 5,000.
To incorporate the company, in most cases a Cayman Exempted Company will be used, which can be incorporated in just 24-hours. ILS transactions also utilise Cayman’s Segregated Portfolio Company Legislation (SPC) and are often incorporated as new cells within an existing SPC structure.
Licensing Requirements
An approved independent auditing firm must be appointed, and the company’s Officers and Directors must also be approved by CIMA, with the provision of basic personal details, a CV that demonstrates their experience in the insurance sector and evidence of no previous criminal convictions.
Cayman Islands insurance companies are required to have a registered office in the jurisdiction and there are numerous service providers that can fulfil this function. Additionally, a locally licensed insurance manager must be engaged by the licence holder.
From Business Plan to Approval
A full, three-year business plan must be presented to CIMA which will be examined in detail and generally the regulator will want certain points addressed or explained. With the efforts of the regulator to streamline the licensing process, the turnaround time for a correctly formatted application with business plan can be as little as six days.
Captive insurance companies have been formed in Cayman for decades and as the international insurance sector has developed, with offshore operations of reinsurance and ILS issuers growing in significance, the development of the Cayman Islands financial infrastructure has been a supportive factor to institutions and participants in these markets.
Captive Formation Advantages
Captive insurance offers a source of insurance for the uninsurable. It can provide insurance coverage which is either not available in the commercial market or is prohibitively expensive.
Reinsurance in Cayman
The Cayman Islands has shown over the years that it understands the needs of the reinsurance industry and provides the right conditions for business to thrive, while updates to the Insurance Law in 2010 provided special incentives to attract reinsurance business.
Advantage Cayman
ILS and Cayman – A Perfect Match
With its expertise in captive insurance over some 40 years and as a world leader in securitisation and structured finance, the capabilities of Cayman Islands professionals are ideally suited to the issuance of ILS transactions. Cayman’s supportive regulatory framework and professional infrastructure has kept the jurisdiction at the forefront of the industry’s development.
Expertise and Innovation
As a British Overseas Territory, the Cayman Islands is both strong and secure and its highly regarded common law legal framework is the foundation for much of the growth of the financial services industry.
First Class Legal System
It has a sophisticated court system and highly developed corporate legislation with respect for privacy and the Rule of Law, with ultimate appeal going all the way to the Privy Council in London.
Its familiar corporate structures provide the certainty and security required by investors, allowing lenders to enforce security to protect creditors and investors.
Constant Evolution and Refinement
Financial services legislation is constantly evolving, with input from industry associations like IMAC, to ensure that it always meets the changing needs of clients in a dynamic competitive marketplace.
Explore Cayman’s Legal System
Cayman’s highly developed judicial and court system is a model for the world and the hallmark of a first-class international financial system. Its specialised Financial Services Division features judges with great experience in financial matters and much of the world’s most complex and high value litigation is settled here.
You can explore the Cayman Islands legal system in detail here.