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Cayman Islands Insurance

The insurance sector of the Canary Islands enjoys many benefits in comparison to that of other countries, aside from the presence of legislation that makes the setup of such a company easier. As of 1Q 2007, 771 insurance companies have registered in the Cayman Islands. The Cayman Islands also has the second largest captive insurance market in the world, bested only by Bermuda, with 626 captives

Creating an insurance company is made easier by the Segregated Portfolio Company Law implemented in 1998. The SPC Law allowed exempted companies to divide or segregate their portfolios into a potentially unlimited number, creating cells of smaller portfolios that were independent from each other. This allows a company that does not deal with insurance to create an insurance company by just using one of their portfolio ‘cells.’ SPCs are required to pay additional fees and submit list of all their segregated portfolios and respective accounts to the Registrar of Companies. Written consent of each of the company’s creditors must also be acquired because each of the segregated cells could act as a separate legal entity. A business plan will be submitted for regulatory approval for each segregated cell if it is to stand alone.

There are three types of licenses available for insurers operation within the Cayman Islands. Class A licenses are for companies insuring local risks in the Cayman Islands. Unrestricted Class B licenses allow companies to insure any non-domestic risks. Restricted Class B licenses are generally for captives, allowing companies to insure only their respective parent companies.

Setting up a captive insurance company is advantageous to the parent company because the capital used for insurance premiums do not exit the overall corporation. That then allows the overall corporation to invest the insurance premiums until payables are present. Setting up a captive insurance company as a segregated cell is also advantageous because the parent company is classified as Exempted and is therefore not subject to taxation.

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