Insurance laws Cayman Islands (BOT)
The Cayman Islands has a modern and flexible regulatory framework for the insurance industry, which is a major pillar of its economy. As a British Overseas Territory, it has developed a sophisticated system that aligns with international standards, making it a leading domicile for captive insurance and reinsurance.
Regulatory Authority
The Cayman Islands Monetary Authority (CIMA) is the sole regulator of the insurance sector. CIMA is an independent body responsible for:
Licensing: Issuing and renewing licenses for insurance companies, agents, brokers, and managers.
Supervision: Monitoring the ongoing financial health and compliance of licensees to protect policyholders.
Enforcement: Taking regulatory action for any breaches of the law or directives.
Key Legislation
The primary legislation governing the industry is the Insurance Act, 2010 (as amended). This act provides a comprehensive framework that covers:
The licensing process and obligations of licensees.
The powers and duties of CIMA.
The different categories of insurance licenses.
Corporate governance, risk management, and solvency requirements.
Categories of Insurance Licences
The Insurance Act, 2010, established four main categories of insurance licenses, tailored to the specific needs of the market:
Class A Insurers: These are insurers that carry on domestic insurance business, meaning they serve the local Cayman Islands market. This can include local companies or external insurers.
Class B Insurers: This is the category for captive insurance companies. They are licensed to carry on insurance business other than domestic business, and they are further subdivided based on the percentage of "related business" they conduct. Captive insurance is a form of self-insurance where a company establishes its own insurance subsidiary to insure its risks.
Class C Insurers: These are special purpose insurers, often used for catastrophe bonds and other insurance-linked securities. Their insurance obligations are limited in recourse to and collateralized by their funding sources.
Class D Insurers: This category is for companies that carry on reinsurance business.
Mandatory Insurance
Health Insurance: This is a key area of compulsory insurance in the Cayman Islands. Under the Health Insurance Law, employers are responsible for providing health insurance for their employees, their unemployed spouses, and dependent children. Self-employed individuals are also required to secure their own coverage. The law sets out a minimum level of prescribed benefits, known as the Standard Health Insurance Contract (SHIC).
Motor Third-Party Liability: This is mandatory for all vehicles operating on public roads, providing coverage for bodily injury and property damage to third parties.
Consumer Protection and Other Regulations
Market Conduct: CIMA has specific rules and statements of guidance on market conduct for insurers, agents, and brokers. These rules are designed to ensure fair, clear, and not misleading communication with consumers and to protect their interests.
Non-Admitted Insurance: The placement of non-admitted insurance is generally prohibited, meaning that risks in the Cayman Islands must be insured by companies licensed to operate there.
Corporate Governance and Solvency: As part of its adherence to international standards, CIMA has strict rules on corporate governance, risk management, and capital adequacy for all licensees, particularly for Class A insurers to ensure the protection of the local market.
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