The impacts of Solvency II and other international regulation on captive insurance companies are one of the discussion topics during a meeting this week of the International Association of Insurance Supervisors in the Cayman Islands.
Hosted by the Cayman Islands Monetary Authority, senior members from the association and industry participants gather from 18-21 June for the IAIS Global Seminar and Committee Meetings to discuss and exchange ideas on current international regulatory initiatives affecting the insurance industry.
This includes Europe’s latest insurance regulation Solvency II, which introduces tighter capital and corporate governance requirements for commercial insurers and reinsurers.
As the Cayman Islands’ robust and transparent legislative and regulatory platform is already in compliance with international standards, CIMA continues to analyse Solvency II’s potential impact on the captive insurance market before it considers adapting the new equivalency requirements.
About 90 per cent of Cayman’s insurance business is comprised of North American-based captive insurance companies. These private self-insurance vehicles do not carry the consumer risk as does a commercial insurer or reinsurer, and therefore they require a different regulatory model, the Insurance Managers Association of Cayman said in a news release.
Bermuda, which has been pushing ahead to meet the Solvency II requirements, has been told that the Europeans will consider segmented equivalence for Bermuda, which will allow captives to be treated differently, but this exemption has not yet been tested, the organisation noted.
“IMAC stands firmly behind CIMA’s balanced and pragmatic approach to Solvency II. The Cayman Islands has a completely transparent regulatory model that has withstood the test of time, and is now the second largest captives domicile, holding more than $11.8 billion in premiums,” said Clayton Price, chairman of IMAC. “It is the unintended consequences that need to be carefully considered. Unless captives are carved out of this regulation that has been designed for commercial re/insurers, we believe that Solvency II will needlessly drive up capital costs for our North American clients. As a result of CIMA’s considered stance on Solvency II, we are already seeing new captives redomestisticating here,” he added.
Key personnel from the European Insurance and Occupational Pensions Authority, including Karel Van Hulle, who is the head of Unit for Insurance and Pensions, Director General Internal Market and Services for the European Commission, are expected to attend the session along with CIMA’s Head of Insurance Gordon Rowell.
The IAIS is the global standard-setting body for regulation of the insurance industry. The Cayman Islands is a founding member of the IAIS Executive Committee and not only adheres to the IAIS Core Principles of Insurance Supervision, but actively assisted in the development of the revised Core Principles.