2020: A year we’ll not forget

It’s December 9, 2019. Cayman’s international insurance industry is in full flow as the end of the year approaches. Buoyed by the success of the biggest Cayman Captive Forum in history, the industry is optimistically looking forward to another bumper year of new captive formations, increased premiums and continued diversification within the industry.

Captive insurance industry participants have travelled far and wide to meet clients and attend conferences, further broadening Cayman’s offering as a jurisdiction.

Fast-forward a year to December 9, 2020. It’s been quite the year. Lockdowns are the new normal. Travel is restricted, with some international borders remaining closed. Anyone braving travel must quarantine for 14 days.

Closer to home, Cayman’s tourism industry has been decimated. The newly extended airport is deserted. The streets of George Town remain quiet from the usual hubbub of foot traffic of cruise passengers exploring what hidden gems are on offer.

In late August 2020, the Insurance Managers Association of Cayman (IMAC) executive committee took the decision to postpone the Cayman Captive Forum. It would therefore be easy to assume that the insurance industry has had an equally turbulent time.

In the face of adversity

Despite the apparent despair, industry association Cayman International Insurance (CII) is emerging from 2020 like a phoenix from the flames. Stronger than ever, the jurisdiction is using the past 12 months to further develop and add additional sophistication to an already well-established and respected industry.

In spite of office closures and staff being forced to work a large portion of the year from home, interface with the Cayman Islands Monetary Authority (CIMA) has increased. IMAC’s executive committee held routine meetings internally and with the insurance division of CIMA on a near-monthly basis following the lockdown.

CIMA has been extremely proactive in its approach to client interaction, with Zoom and Teams calls a regular feature of the COVID-19 times.

This was warmly received by the industry. The positive relationship the industry has with CIMA is reflected in the projections of new formations. As at December 14, 2020, CIMA had issued 31 new insurer licences in 2020. These include 27 class Bs, two class Cs and two class Ds. At the same date, CIMA has issued nine new portfolio insurance companies (PICs) in 2020. Five approved licence applications and six new applications are being reviewed. This is compared to 33 new licences issued in 2019.

As at September 30, 2019, the industry reported total premiums of $18 billion, and total assets of $68 billion. Fast-forward 12 months and the total premiums have risen by 16.6 percent to $21 billion, and total assets to $74 billion—a growth of 8.8 percent.

“The Cayman Islands was removed from the EU’s list of non-cooperative jurisdictions for tax purposes.”

“Entities that are tax-resident in another jurisdiction have until February 28, 2021 to submit their filings.”

Administrative Fines (Amendment) Regulations

CIMA has implemented the Monetary Authority (Administrative Fines) (Amendment) Regulations, 2020, which came into effect on June 26, 2020.

These regulations provide CIMA with the authority to impose an administrative fine on a person or entity who breaches a provision prescribed in the regulations.

The category of breach and single fine are as follows:

• Minor breach: These are breaches for which a non-discretionary fine is issued by CIMA. Where the conditions in the Administrative Fines Regulations are met, CIMA will apply a fine for those breaches. A fine for a minor breach is fixed at KYD 5,000 ($6,097.50). Continuing fines for minor breaches is capped at KYD 20,000 ($24,390)
• Serious and very serious breaches: CIMA has the discretion to determine whether to apply a fine and the amount of such fine. For serious breaches, the maximum fine amount is KYD 50,000 ($60,975) for an individual and KYD 100,000 ($121,950) for a body corporate. For very serious breaches, the maximum fine amount is KYD 100,000 ($121,950) for an individual and KYD 1,000,000 ($1,219,500) for a body corporate.

The Rule and Statement of Guidance—cybersecurity

This Statement of Guidance (SOG) was gazetted on May 27, 2020 and required regulated entities to be in compliance with same by November 27, 2020.

For insurers, classes B, C, & D fall within the scope of the Rule & SOG. However, under section 5.4 of the Rule & SOG, CIMA recognises that certain regulated entities are fully managed by a licensed service provider. Furthermore, these entities might not develop their own cybersecurity framework but rather rely on the framework of their service provider (insurance manager in the insurance industry).

Such regulated entities that are managed by an insurance manager and rely on their framework must make appropriate enquiries, through their governing body, to satisfy themselves with the level of cybersecurity applied by that service provider.

“Despite possible negative financial repercussions from the COVID-19 pandemic, IMAC was able to commit the annual $160,000 grant to its scholarship fund.”

Education

Despite possible negative financial repercussions from the COVID-19 pandemic, IMAC was able to commit the annual $160,000 grant to its scholarship fund—a fund dedicated to providing young people with the opportunity to study abroad: to gain knowledge, experience, confidence and a fresh perspective and to use this experience to build their careers and to enrich their lives and communities.

To date, our scholarship fund has raised over $4.7 million and supported 54 young Caymanians pursue further studies around the globe in disciplines as diverse as business management, arts and the sciences.

Closer to home, but continuing on the theme of education, CII partnered with the International Center for Captive Insurance Education to assist in providing educational content to its membership. IMAC has recently hosted the first in a series of webinars/educational sessions, providing Cayman’s insurance industry with education credit points through monthly sessions on varying topical subjects

What may be seen as a fitting finale to 2020 for CII, the annual golf tournament had a record turnout, bringing together 108 golfers to network and raise funds for the scholarship fund. Co-sponsored by Grant Thornton and Scotiabank, the net proceeds of the event are expected to be just shy of $12,000.

2020 has certainly brought its challenges. However, rising high above these is the Cayman Islands: a domicile that is mature and well respected, yet dynamic as it continues to evolve to meet the demands of the global clientele it serves. A domicile of excellence for international insurance and reinsurance business.