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Insurance & Reinsurance Law & Regulation: Cayman Islands

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  1. WHAT RISKS MUST BE INSURED?
  2. Under the Air Transport (Licensing of Air Services) Regulations, 1977, every applicant for a licence to operate a scheduled service needs to submit proof of insurance of the aircraft for the proposed route. Also, every applicant for a series of non-scheduled passenger services must submit proof that the applicant is certified, licensed and insured in accordance with the regulations of the state of registry. Such insurance may be provided by a foreign insurer provided that the aircraft is not ordinarily based in the Cayman Islands (see section 1.2.2 below for a definition of ‘domestic business’). If the aircraft is ordinarily based in the Cayman Islands, such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from the Cayman Islands Monetary Authority (CIMA) to place insurance coverage with such foreign insurer.
  3. Under the Banks and Trust Companies Law (2013 Revision), a licensee holding a Trust Licence is required to maintain adequate professional indemnity insurance or have in place other appropriate arrangements to cover risk. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to
  4. Under the Builders Law, 2007 (not yet in force; awaiting commencement order), the Builders Board may refuse to register an entity if the business entity concerned does not have public liability insurance at all or has
  5. A person licensed under the Companies Management Law (2003
  6. Under regulations enacted under The Customs Laws (2012 Revision), keepers of warehouses referred to in The Customs (Bonded Warehouses) Regulations (2011 Revision) and Customs (Bonded Warehouses) (Amendment) Regulations, 2012 are required to cover risks in respect of goods in the bonded warehouse by way of bond with a recognised bank or insurance company. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.
  7. Under the Dangerous Substances Handling and Storage Law, 2003,
  8. Under the Directors Registration and Licensing Law 2014, licensed professional directors and corporate directors are required to maintain a minimum level of insurance cover.
  9. Under the Health Insurance Law (2013 Revision), every employer is obliged to effect and continue on behalf of each of his employees and any child and unemployed spouse of an employee a standard health insurance contract. The obligation on an employer is to effect a standard health contract, which is issued by an approved insurer and which complies with the relevant requirements prescribed by the Health Insurance Regulations (2013 Revision). An approved insurer must be an insurer licensed under the Insurance Law, 2010 (the Insurance Law) as
  10. Under the Health Practice Law (2013 Revision), operators of a healthcare facility must (i) provide malpractice insurance or indemnity cover approved by the Health Practice Commission; (ii) ensure adequate liability insurance coverage for the healthcare facility; and (iii) ensure that persons who work at the facility under a contract of services with the healthcare facility have adequate malpractice and other relevant insurance, and such malpractice insurance, liability insurance, indemnity cover and any other relevant insurance shall be obtained from an authorised insurer. Under the Health Practice Law (2013 Revision), ‘authorised insurer’ means: (i) an insurer licensed under the Insurance Law to carry on insurance business within the meaning of that law; or (ii) any other person or organisation approved by the Health Practice Commission to provide medical or any other type of indemnity cover in the Islands. Accordingly, subject to approval by the Health Practice Commission, such insurance (medical malpractice) may be provided by a foreign insurer subject to the limitations discussed in 1.2.2 below.
  11. Under the Insurance Law, an insurance broker or insurance manager shall maintain in force, and comply with the conditions of cover of, professional indemnity insurance placed with an insurer licensed to carry on domestic business and provide for an indemnity of not less than 820,000 Cayman Islands dollars (US$1,000,000) for any one loss, or such other figure as may be prescribed by CIMA. Such professional indemnity insurance shall extend to include the activities conducted on behalf of the broker or insurance manager and be subject to review by CIMA. In the event that such professional indemnity insurance is invalidated, becomes voidable or is withdrawn, cancelled or not renewed, the licensee shall immediately notify CIMA and shall forthwith cease to solicit further insurance business until such professional indemnity insurance has been reinstated or replaced. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.
  12. Under the Legal Practitioners (Incorporated Practice) Regulations (2006
  13. Under the Merchant Shipping Law (2011 Revision), every ship registered in the Cayman Islands must carry insurance cover against risks of loss or damage to third parties, and in particular in respect of the shipowner’s liabilities to a crew member and claims in respect of loss or damage caused by any cargo carried on board the ship. Every ship anchoring in or trading in or from Cayman Islands waters or entering a port in the Cayman Islands shall carry insurance cover against risks of loss or damage to third parties, and against wreck removal expenses.
  14. Under the Merchant Shipping (Marine Pollution) Law, 2001, every ship registered in the Cayman Islands shall carry insurance cover against risks of loss or damage to third parties, and in particular: (i) in respect of the shipowner’s liabilities to a crew member under the Merchant Shipping Law (2011 Revision); and (ii) claims in respect of loss or damage caused by any cargo carried on board the ship as provided under the Merchant Shipping Law (2011 Revision). Every ship anchoring in or trading in or from Cayman Islands waters or entering a port in the Cayman Islands shall carry insurance cover against risks of loss or damage to third parties, and against wreck removal expenses in an amount satisfactory to the Receiver of Wreck appointed under the Merchant Shipping Law (2011 Revision). Non-government ships are required to have compulsory insurance against liability for pollution. Such insurance may be provided by a foreign insurer provided that the ship is not ordinarily based in the Cayman Islands (see the definition of ‘domestic business’ in section 1.2.2 below). If the ship is ordinarily based in the Cayman Islands, such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.
  15. Under The Merchant Shipping (Oil Pollution) (Cayman Islands) Order
  16. Under the Vehicle Insurance (Third Party Risks) Law (2012 Revision), users of vehicles on a road are required to be insured against third party risks by an insurer licensed as a Class A insurer. This includes a vehicle provided for the purposes of an instructional ability and fitness test as per The Traffic (Driving Instruction) Regulations, 2012. As the Vehicle Insurance (Third Party Risks) Law (2012 Revision) mandates a Class A insurer, such insurance cannot be provided by a foreign insurer.
  17. Under The National Gallery Law, 1999, the National Gallery Management Board shall insure the works of art in the national collection against theft, damage or loss. Accordingly, subject to approval by the Governor in Cabinet, such insurance may be provided by a foreign insurer.
  18. Under the Petroleum Handling and Storage Law (1996 Revision), the Governor in Council may make regulations for compulsory insurance cover to be taken out regarding the storage, handling or transportation of petroleum. Under the Petroleum Regulations (1998 Revision), the Government of the Cayman Islands may require a contractor to take out and maintain such form of contract of insurance (as the Governor in Cabinet may approve) against any liability the contractor may
  19. Under the Port Regulations (2013 Revision), users of port facilities must carry bodily injury liability insurance and property damage liability insurance. Such insurance may be provided by a foreign insurer provided that the ship using the port facility is not ordinarily based in the Cayman Islands (see section 1.2.2 below – definition of ‘domestic business’). If the ship is ordinarily based in the Cayman Islands, such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.
  20. Under the Traffic (Public Passenger Vehicles) Regulations (2013
  21. Under the Securities Investment Business (Conduct of Business) Regulations 2003, a person licensed under the Securities Investment Business Law (2011 Revision) must maintain insurance to cover at least: (i) professional indemnity; (ii) the professional liability of senior officers and corporate secretaries; and (iii) business interruption. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.
  22. Under the Strata Titles Registration Law (2013 Revision), a Strata corporation has a duty to, amongst other things, insure and keep insured the building to the replacement value thereof against fire, earthquake, hurricane and such other risks as may be prescribed, unless the proprietors by unanimous resolution determine otherwise. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.
  23. Under the Registered Land Law (2004 Revision) there shall be implied
  24. The Monetary Authority Law (2013 Revision) gives CIMA the power to set out policies and procedures in a regulatory handbook (the Regulatory Handbook). Policy F4, sections 2.1 and 2.6 of the Regulatory Handbook require auditors of entities regulated by CIMA to hold professional indemnity insurance. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.
  25. Under the Insolvency Practitioners’ Regulations 2008 and the Insolvency Practitioners’ (Amendment) Regulations, 2010, a qualified insolvency practitioner shall not be appointed by the court as the official liquidator of any company unless he and the firm of which he is a partner or employee or the company of which he is an employee has professional indemnity insurance (up to a limit of at least US$10 million in respect of each and every claim and at least US$20 million in the aggregate, with a deductible of not more than US$1,000,000) applicable to the negligent performance or non-performance of his duties as an official liquidator generally. Such insurance may be provided by a foreign insurer subject
  • ‘domestic business’ means insurance business where the contract is in respect of the life, safety, fidelity or insurable interest, other than in respect of property, of a person who at the time of effecting the contract is ordinarily resident in the Cayman Islands, or property that at the time of effecting the contract is in the Cayman Islands or, in the case of a vehicle, vessel, aircraft or other movable property is ordinarily based in the Cayman Islands;
  • ‘local insurer’ means a Class A insurer, incorporated in and having its place of business in the Islands;
  • ‘external insurer’ means a Class A insurer who is not a local insurer and whose principal or registered office is in a jurisdiction outside the Islands where the legislation for the regulation and supervision of insurers is acceptable to CIMA; and
  • ‘reinsurance business’ means the business of accepting risks by effecting or carrying one or more contracts of reinsurance whether directly or indirectly, and includes running-off business, including the settlement of claims.
  1. WHO CAN INSURE NON-COMPULSORY CLASSES OF RISK?
  • the foreign insurer has not been refused a licence under the Insurance
  • CIMA is satisfied that the foreign insurer is fit and proper;
  • the proposed volume of domestic business to be placed with the respective foreign insurer is inadequate to support the payment of Class A licence fees or that some other good and sufficient reason exists; and
  • the foreign insurer can demonstrate to the satisfaction of CIMA an evident need (in terms of additional capacity or policy coverage, or otherwise) that the business be so placed.
  1. WHICH REINSURERS CAN BE USED?
  2. THE TAXATION OF INSURANCE
  3. INSURANCE REINSURANCE AND CAPITAL MARKETS
  • fluctuations in the value of price of property of any description; or
  • an index or other factor, or the occurrence of a particular event, specified for that purpose in the contract,
  1. COMMISSIONS
  2. HOW ARE AGENTS (BROKERS AND UNDERWRITING AGENTS AND THIRD PARTY CLAIMS ADMINISTRATORS) REGULATED?
  3. IS TAKAFUL POSSIBLE?
  4. WHAT SCOPE IS THERE FOR MICROINSURANCE?
  5. EXIT SOLUTIONS – WHAT SOLUTIONS ARE AVAILABLE AND HOW DO THEY OPERATE? HOW ARE FOREIGN SOLUTIONS RECOGNISED?

Published November 2, 2014

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