CAY CIMA Reinsurance Arrangements

On Oct. 6, CAY CIMA issued consultation on reinsurance arrangements

  • CAY CIMA issued private sector consultation paper regarding its rule and statement of guidance on reinsurance arrangements, seeking comments from relevant associations.
  • Document dated Oct. 6, 2021, was added on Sep. 30, 2022, due to backfill.
  • SOG Background
  • CAY CIMA issued a Statement of Guidance (SOG) on reinsurance arrangements for Class A insurers in 2003, and the SOG has been revised over time but lastly in 2008.
  • In 2017, International association of insurance supervisors (IAIS) revised its insurance core principle (ICP) on reinsurance and other forms of risk transfer, see #34776.
  • CIMA has flagged several challenges with some insurers and reinsurers which require the measure to be updated in part to a rule to ensure enforceable means.
  • In some circumstances, reinsurance strategies are deficient, lacking identification, implementation, as well as monitoring of main risks and considerations.
  • Also some risk transfer arrangements are inadequate, exposing insurer/reinsurer to money laundering, terrorist financing, and/or proliferation financing (ML/TF/PF) issues.
  • Cayman National risk assessment (NRA) assessed its insurance sector as low-medium level of vulnerability to ML/TF/PF, a robust regulatory measure is required to mitigate.
  • Thus, the revision of the SOG is necessary to bring it up to date with the legislative changes, updates to international standards, and evolving insurance industry trends.
  • Reinsurance Strategy
  • The reinsurance strategy section of SOG revised to include new subsections.
  • New text aimed at expanding the content of the reinsurance strategy such as strategy forms a key element of the capital and risk management framework (subsection 7.4).
  • Concentration risk and other risks assumed by the ceding insurer (subsection 7.5).
  • Consideration of risk transfer to capital markets (subsection 7.6) and ceding insurer to develop and document for the selection of reinsurance broker/reinsurers (7.7 and 7.8).
  • Calls for ceding insurer to show the impact of reinsurance on liquidity management.
  • Risk Transfer Arrangements
  • Ceding insurers must demonstrate economic impact of risk transfer (subsection 8.1).
  • Certain reinsurance arrangements are not reinsurance contracts (8.3 and 8.4).
  • Reinsurers not retaining any risks are required to provide rationale (subsection 8.5).
  • Counterparty Credit Risk
  • New section expands on certain main counterparty and credit risks ceding insurer should consider such as establishing a minimum criteria for the selection of reinsurers.
  • Such criteria would include that reinsurance brokers should be regulated entities.
  • Additionally, that an initial and ongoing assessment of the reinsurer should take place.
  • Internal Controls
  • A new section establishes the arrangements for internal controls for reinsurance.
  • Including regular review of the reinsurance strategy, a documentation of the persons responsible for developing the reinsurance strategy, regular monitoring of contracts.
  • Consultation
  • Comments from private sector associations on proposal are due before Nov. 10, 2021.
  • Dec. 2022 CAY CIMA Reinsurance Consultation
  • On Dec. 16, 2022, CAY CIMA published proposed Rules and statement of guidance - reinsurance arrangements and related Appendix 1, for comments by Feb. 1, 2023.
  • Document dated Dec. 16, 2023, received Mar. 28, and summarized on Mar. 29.
  • May 2023 CAY CIMA Final Rule
  • On May 29, 2023, CAY CIMA issued final rule, statement of guidance on reinsurance.
  • As well as a issued summary of the comments received on the consultation.
  • In some instances, amendments were made to proposal in response to comments.
  • Measure published in May 26, 2023 Extraordinary Gazette, effective May 27, 2024.

Regulators CAY CIMA; CAY GVT
Entity Types Ins
Reference RF, Nt, 5/29/2023; OG 37, 5/26/2023; Lt, CP, 12/16/2022; Lt, CP, 10/6/2021;
Functions Actuarial and Valuation; Audit; Compliance; Financial; Record Retention; Reinsurance; Reporting; Risk; Treasury
Countries Cayman Islands
Category
State
Products Equity; Insurance; Insurance-Property
Regions Am
Rule Type Final
Rule Date 10/6/2021
Effective Date 5/27/2024
Rule Id 149307
Linked to Rule :34776
Reg. Last Update 5/29/2023
Report Section International

Last substantive update on 06/05/2023