Form a Reinsurance Captive Company (Class Biii)

If you are looking to domicile your captive in the Cayman Islands, what are the next steps to take?
Here’s everything you need to know about getting started.

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Step by Step – Class B(iii) Reinsurance Captive

  • Negotiate fronting and reinsurance arrangements (as necessary) 
  • Once the decision has been made to move forward, you need to select an insurance manager – note a Cayman insurance manager can assist with feasibility support; providing establishment and operational costings and development of broader pro-forma financials
  • Insurance manager clears and reserves a proposed captive name with CIMA
  • Insurance manager generally supports the introduction and selection of other service providers (legal; audit; banking)
  • Insurance manager quarterbacks the build-out of the CIMA license application
  • Prepare your home-state license application for affiliated business (Form D approval in the US)
  • Schedule call/meet the CIMA Insurance Division to discuss the proposed captive – this always leads to license approval efficiencies 
  • Submit the completed license application  
  • CIMA issues ‘No Objection to Incorporate Memo’ following CIMA initial review and approval to progress internally (generally week 2 of review)
  • Appointed Cayman legal counsel incorporates the entity, Insurance Manager subsequently shares incorporation documents with CIMA
  • Insurance manager facilitates CIMA queries through the license application process
  • CIMA Insurance division prepare internal paper in support of license application
  • CIMA Management Committee approves the license (generally with subjectivities, some to be cleared ahead of license release)

Incorporation and Approval

Incorporation of the company takes place through the General Registry, which normally takes five business days from the submission of documents. It is usually only done after the insurance license has been approved in principle, but can be done sooner. 

The Application Form – Reinsurance Captive

The application should include the following: 

  • Completed license application form 
  • The business plan, which includes: 
    • Rationale for formation
    • Ownership structure and company descriptions
    • Organizational structure identifying group regulated companies (where licensed/incorporated/regulated)  
    • Provide regulatory contact details for regulated companies in group
    • Directors and officer details (i.e. Personal questionnaire, resume, references, police clearance certificates/affidavits, passport/driver’s license
    • Natural person 10% or greater ownership and/or control – as above plus net worth statements and source/origin of funds statement
    • Capital:
      • Cayman Stat capital as a minimum
      • Internal capital models (ICM) and/or formula based models such as Solvency II – Standard Formula, NAIC Risk-Based Capital and Bermuda BSCR (for affiliated groups) or simple self-imposed NEP : capital ratios permissible.
      • CIMA does not mandate one capital model but allows insurers to use an ICM or a recognised external capital framework, or a hybrid approach 
      • Models should be documented, validated, subject to governance and oversight and independently assessed
    • Description of proposed reinsurance programs, type; form; terms & conditions; premiums; projected profitability
    • Actuarial/pricing support as applicable
    • Draft Reinsurance Contracts
    • Credit for reinsurance collateral requirements and type  
    • Details of any fronting/cedant and reinsurance arrangements
    • Details of original claims administration
    • Description of loss reserving methodology
    • Description of investment and dividend policy
    • Tax status
  • Financial projections for a three-year period including scenario stress testing
  • Acceptance letters from an insurance manager and auditor in the Cayman Islands
  • Director letter of undertaking to stand up various CIMA regulatory frameworks within 6 months of licensing 

Enquire

If you’re interested in forming an insurance or reinsurance company and need further information, please contact us.

Further information can also be found on the Cayman Islands Monetary Authority website.

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