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Cayman Islands Regulatory Announcements

Posted by Kerr, Russell and Weber, PLC
March 6, 2009

We have obtained copies of regulatory policy, guidance and rule pronouncements issued March 2, 2009 by the Cayman Islands Monetary Authority (CIMA). They broadly describe CIMA's move to enhance compliance responsibility for captives, their boards, and managers, including close monitoring of each licensee's financial integrity.

Among the highlights are:

1. CIMA will practice "Consolidated Supervision" as an overarching regulatory policy. As applied to insurers, this will impact on and off-island affiliate disclosure and ownership transparency requirements. This seems consistent with CIMA's increased commitment to contemporary 'know your customer' standards.

2. One of the rules requires implementation of risk management strategies for each insurer. The company strategies are to be coordinated with existing CIMA standards on internal controls, asset management, investment strategy and reinsurance arrangements. The aim is to "monitor all internal and external sources of risk that could have a material impact on an insurer's operations". Each insurer will eventually be required to adopt written standards that can be tailored to its type and size. The emphasis appears to be on financial integrity, early warnings and stress testing modalities. Boards must approve the risk management framework and provide for its oversight directly or through independent means, which include licensed insurance managers of Class B carriers.

The exact implications of these recent announcements are of course unclear at this time, and, importantly, there is no deadline yet stated for adopting a risk management strategy statement. We assume that the Cayman insurance managers, primarily through their association, IMAC, will be proactive in response and in developing compliance recommendations.

None of this is alarming and all of it is consistent with increased attention to financial solvency monitoring and board responsibility by the better captive jurisdictions. We will track developments closely from our perspective as U.S. program counsel and will apprise you and your board accordingly as further developments occur. You should anticipate being briefed about these items by your island managers at upcoming board meetings. We will be prepared to comment on them as well.

Please feel free to contact us if you need any further information at this time, or if you have concerns about how this might apply to your existing program.

Contact information:

Monte D. Jahnke
Kerr, Russell and Weber, PLC
500 Woodward Avenue, Suite 2500
Detroit, MI 48226
Telephone: (313) 961-0200
Fax: (313) 961-0388
Email: mdj@krwlaw.com
Web: www.krwlaw.com
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