We are pleased to bring you the summer 2022 edition of Conyers Coverage, the Cayman Islands insurance newsletter.
The Cayman Islands insurance and reinsurance industry has had a strong start to the year and Conyers is honoured to be at the forefront of what is an exciting period of growth and change for the industry locally.
We cover a lot of ground in this edition. We discuss some key themes emerging in the Cayman Islands (re)insurance market from a regulatory perspective as well as some developments, deal highlights, and new legislation, including some interesting updates from our litigation colleagues. We round off the update by introducing you to another member of our growing team who offers fiduciary and corporate services supplementary to Conyers legal services, as well as sharing some pictures of our recent volleyball tournament!
To jump straight to an article, please click one of the links below:
New Rule and SOG on Investment Activities for Insurers: Five Items to Consider Now
Rated Note Feeders, Fund Finance and the Cayman Islands
Legislative Recognition for Capital Redemption Contracts, Aka Funding Agreements
A Summary of the New Restructuring Officer Regime
Review & Reset: Topical Items for Consideration by Insurers
Mistakes Were Made. What is a Liquidator To Do?
FATF Compliance - EU Confirms No Additional AML-CFT Measures for Cayman
Meet The Team: Jarladth Travers
We welcome your comments or article suggestions and please don't hesitate to get in touch if you would like to participate in future editions of Conyers Coverage.
New Rule and SOG on Investment Activities for
Insurers: Five Items to Consider Now
Pip Gilkes, Associate
In February 2022 the Cayman Islands Monetary Authority introduced a new Rule and Statement of Guidance on Investment Activities for Insurers ("Rule" and "SOG") to bring our regulatory framework relating to investments for insurers (which term includes reinsurers) up to date with Insurance Core Principle 15 developed by the International Association of Insurance Supervisors, of which the Authority is an active member. The Rule and SOG come into effect at the end of February 2023 and will apply to all insurers, with more onerous requirements for Class B(iii) and Class D insurers. We have distilled the requirements down to the five key elements insurers will need to action as soon as practicable to ensure compliance.
Review & Reset: Topical Items for
Consideration by Insurers
Sarah Farquhar, Associate
It's necessary from time to time to take a step back to review an insurer's broader legal, regulatory and compliance landscape and reset and restructure its compliance procedures where required. We briefly set out below a few topical items that may be worth some consideration, and even remediation.
Legislative Recognition for Capital Redemption
Contracts, Aka Funding Agreements
Derek Stenson, Partner and Nick Ward, Associate
On Tuesday 28 June 2022, the Insurance (Amendment) Act 2022 (the "Amendment") was published in the Official Gazette having been brought as a bill before the Cayman Islands Parliament during its third meeting of the 2021-2022 session. The Amendment is targeted at giving a legislative footing for the first time in the Cayman Islands to 'capital redemption contracts' (also known in certain other jurisdictions as 'funding agreements').
FATF Compliance - EU Confirms No Additional
AML-CFT Measures for Cayman
Frank Farrell, Associate
The Cayman Islands recently introduced measures to further improve its technical compliance with the 40 Financial Action Task Force ("FATF") recommendations relating to anti-money laundering and countering the financing of terrorism ("AML/CFT").
Rated Note Feeders and the Cayman
Islands
Michael O'Connor, Partner and Farrah Miller, Associate
The ongoing convergence of the private equity and insurance sectors has recently led private equity managers to innovate in their investment structures offered to investors - and in particular to insurers. From a Cayman Islands perspective one of the most notable trends in this regard has been the emergence of 'rated note feeders' being established as Cayman Islands limited liability companies (LLCs) or exempted limited partnerships (ELPs). These rated note feeders bridge the accessibility gap between insurers and private equity funds and offer insurance companies an opportunity to diversify their investment portfolios with the stellar returns that private equity brings, while smoothing certain regulatory considerations that have in the past been a factor in considering such investments.
Notable Recent Transactions
Derek Stenson, Partner
Conyers is honoured that so many clients entrust us to support them with insurance legal and regulatory services. Our team act on the majority of all new insurance licensees established in the Cayman Islands (similar to our Conyers colleagues' position in the Bermuda market). One recent significant project has been the Talcott / Principal Financial Group transaction that has recently closed.
More details are in the links below.
Conyers assisted with the licensing of Talcott's Cayman Islands based insurer which has reinsured approximately $25 billion of liabilities, comprising $16 billion and $9 billion of retail fixed annuity and secondary guarantee universal life insurance liabilities, respectively, from Principal.
This transaction is indicative of the continued grown and positive momentum the Cayman Islands reinsurance industry is experiencing.
A Summary of the New Restructuring Officer
Regime
Jonathon Milne, Partner
Later this year amendments to Part V of the Cayman Islands Companies Act (the "Companies Act") will be introduced to commence a new restructuring officer regime available to companies in financial difficulty. Under the new regime, it will be possible to petition the Cayman Court to appoint "restructuring officers" and, from the time of filing, for the company to take the benefit of an automatic moratorium (i.e. akin to a US Chapter 11 stay or English administration moratorium). Once initiated, with the benefit of breathing space and expert guidance, the relevant company may endeavour to promote and implement a restructuring (e.g. via a scheme of arrangement, a parallel process in a foreign jurisdiction or a consensual compromise).
Mistakes Were Made. What is a Liquidator To
Do?
Erik Bodden, Partner, and Spencer Vickers, Counsel
A fundamental principle of insolvency law in the Cayman Islands is that upon the commencement of a liquidation of a company, a line is drawn in the sand and the assets of an insolvent company should be distributed on a pari passubasis (e.g. each unsecured creditor should share equally in the available assets of the company). While subject to some exceptions (like any good fundamental principle of law), the concept that all unsecured creditors should be on "equal footing" is the basis for a wide array of insolvency legislation and case law. From voidable preference legislation to laws permitting the avoidance of undervalue dispositions, from the extensive investigative powers bestowed upon Court-appointed liquidators to the particularised proof of debt process, great care has been taken to ensure that the pari passu principle is respected to the extent possible.
Conyers Fiduciary and Corporate Services
Meet the Team: Jarladth Travers
Jarladth Travers is Senior Vice President and Head of Conyers Financial Institutions Group ("FIG"). Jarladth joined Conyers in October 2018. He specialises in providing directorship and fiduciary services to Cayman Islands vehicles including those participating in the insurance industry.
Jarladth has extensive experience in providing directorship services to a wide range of insurance and reinsurance entities and holding entities, as well as permanent capital vehicles to such insurance carriers. Jarladth also has particular expertise with a number of Cayman Islands regulatory regimes and via FIG offers FATCA/CRS and AML related services and associated support with related tax documentation.
Jarladth is a Chartered Certified Accountant and an Accredited Director (DEAP) through the Institute of Chartered Secretaries and Administrates of Canada. He has 16 years of Cayman Islands experience, having joined Conyers from another leading law firm.
Read on to learn more about Jarladth»
About Conyers' FIG
Through Conyers Client Services, Conyers' FIG offers clients the full range of follow-on management, administrative and secretarial services in the Cayman Islands. FIG's mission is to provide clients with peace of mind that all of their on-going governance, regulatory, and compliance obligations are met in good time and in good order.
FIG provides the following governance, regulatory and compliance services to entities under their administration:
- CIMA approved independent director services
- Share Trustee services
- Board Support services
- Regulatory and Compliance services, including but not limited to:
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- Anti-Money Laundering officer appointments
- Anti-Money Laundering independent reviews
- Anti-Money Laundering training for directors
- US FATCA and Common Reporting Standards registration and filing services
- Country by Country Reporting Services
- Tax administration services
- Beneficial Ownership and Economic Substance compliance
- Remediation projects
IMAC Education Session
On 19 May 2022, Partner Derek Stenson, along with Associates Sarah Farquhar and Pip Gilkes joined Grant Thornton and Oppenheimer to deliver a CPD accredited workshop to the Insurance Managers Association of the Cayman Islands (IMAC) as part of their Educational Series. The workshop covered Legal and Regulatory updates including recent case studies on Corporate Governance issues.
If you would like to learn more about this presentation, or have the Conyers Insurance team deliver an educational session to your team, please contact Derek Stenson.
Conyers Classic, 2nd Annual Beach Volleyball Tournament
In April we were once again pleased to host the Conyers Classic Beach Volleyball Tournament. 12 teams from the Cayman Islands Insurance industry battled it out with Strategic Risk Solutions emerging victorious!
If you attended the event, you can relive the fun, and nail biting action by viewing our picture gallery here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
