Whistle-blower protection strengthened by insurance law

A bill to amend the insurance law
to strengthen whistle blowing provisions and increase penalties for breaches
has been passed in the Legislative Assembly.

Premier McKeeva Bush explained to
the Legislative Assembly, which passed the amendments into law last week, that
the process of re-organising the regulatory framework for insurance had been
going on for several years and the latest amendments were based on
recommendations from an Insurance Working Group and the International Monetary
Fund.

Among the amendments is a
strengthening of protection for whistle-blowing insurance managers and
auditors.

“This enhances [the Cayman Islands
Monetary Authority’s oversight of international insurers licensed in Cayman by
making it mandatory for insurance managers who are their agents to inform CIMA
if the manager has concerns or information about the licensee’s fitness and
probity, ability to meet its obligations, criminal activity proceedings or
breach of its licence,” Mr. Bush said.

He added that the law has had
whistle-blowing provisions for insurance managers since 1979, but the new law
extends these provisions to make them more explicit, to include auditors, and
gives immunity from damages for those carrying out those duties, obligations
and functions under the law.

The Insurance Working Group was set
up after 2005’s Hurricane Ivan and the subsequent controversy over insurance
claims on damaged property.

Mr. Bush said that the IMF had
advised that changes be made to the legislation to bring it in line with
international standards. The premier said most of those standards were being
adhered to in practice but were not set out in law and the amendments sought to
rectify this.

He said the aims of the law were to
clearly differentiate between the domestic and international insurance markets
in Cayman and to regulate each in accordance with its requirements; to
strengthen legislation to protect Cayman residents; to bring the law up to
international standards; and open up new frontiers of business development.

The new law creates two new classes
of insurance business. Currently, Class A refers to domestic insurers and Class
B to international captive insurance businesses. The amended law creates new
Class C and Class D categories for reinsurers.

“The Cayman Islands has been
approached in the past by numerous reinsurers who were seeking to be
re-domicile here but due to the lack of specific legislation pertaining to
reinsurance, it was not attractive for them to finalise their move. We know we
have the interest of the international re-insurance industry, now we have the
legislative framework in place to welcome them,” he said.

The amended law, which was passed
by all the lawmakers present at a meeting of the Legislative Assembly on
Wednesday, 15 September, also increases protection for domestic policy holders,
Mr. Bush said, by requiring class A insurers – domestic insurers – to have
Cayman Islands Monetary Authority approval in order to transfer or amalgamate
all or part of the insurers’ long-term business. It empowers CIMA to approve or
deny requests by the insurer for portfolio transfer and amalgamation.

In the event of a dispute over a
domestic insurance contract, domestic licensees must agree to arbitration.

“After a review of recent events in
the domestic market, including the difficulties of CLICO Cayman and British
American Insurance, which impacted local insurers, the new law lays a framework
for robust set of capital insolvency requirements for insurers and enhances
consumer protection,” Mr. Bush said.

The Cayman Islands Monetary
Authority put CLICO Cayman under controllership in May last year after the
insurer’s holding company, Trinidad-based CL Financial, ran into financial
difficulty. A month later, the authority issued British American Insurance
Company with a cease and desist order and placed the insurer under receivership
in September last year after its financial and operational situation had deteriorated.

Amendments to the Insurance Law
also make it an offence to knowingly and wilfully provide falsified or
misleading information to the Cayman Islands Monetary Authority, carrying a
fine of $100,000 and one year in prison.

Mr. Bush said: “Fines have been
generally disproportionate to the nature of the offences, a situation that both
us and the IMF noted. The new insurance law increases the penalties,
particularly in respect of domestic insurance market.”

The law also allows the Cayman
Islands Monetary Authority to impose certain conditions regarding decisions
made by a licensee, including the suspension of rights and decisions in cases
where the authority has concerns about the ability of the licensee to meet its
obligations or about the manner in which the business is being conducted.

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1 COMMENT

  1. There is at least on Insurance company who should take notice and change its bad practices.
    This company name I will not post here but will provide to any agency who request it.
    The facts: Insurer issued term life insurance for an X amount of years, arrangement was made with the insured employer to collect the annual premium lump-sum, individual repaid employer through monthly deduction from paycheck.. After X amount of years the premium would increase, the Insurance company would fail to notify the policy holder of the increase, receive the annual premium which was now lest than the required amount, place the money in a holding account, and change the policy status to lapse. They would hold the funds until the next years premium was received apply the shortage and pay the premium after the fact. Because the premium amount was still short the policy was again assigned a status of lapse. This went on for years, where I remained uninsured, and the insurance company was paid without taking any risk. Had I died during this lapse status of my policy my beneficiaries would have had no claim. I believe this was a deliberate act to swindle me and my family; and that this company is still doing it to other individuals.. I was never notified of the premium increase, that the annual payment was short, or that my policy had lapsed. It was after I changed employment and called to make a new payment agreement found out what was going on.. Yes there is a need for wistle blower protection..

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