Cayman reinsurance: Setting the record straight

By Adrian Lynch

U.S. life and annuity companies play a vital role in providing guaranteed income for retirees. So does the reinsurance ecosystem that supports them – including, increasingly, the Cayman Islands.

Recent commentary from external observers has raised questions about Cayman’s reinsurance framework that deserve direct, factual answers. Scrutiny is legitimate and we welcome it. But accuracy matters, and some of what has been written requires correction.

Cayman’s process

The narrative of a ‘blind spot’ populated by loosely supervised entities doesn’t survive contact with the reality of how a Cayman reinsurer is actually established and operated.

Before a single dollar of liability is ceded, a typical transaction involves U.S. onshore counsel, offshore legal advisers, onshore and cedant-side actuaries, independent actuarial reviewers, ALM specialists, tax advisers, reinsurance brokers, auditors, investment managers, insurance managers, compliance officers, and the analytical and actuarial staff of CIMA – the Cayman Islands Monetary Authority – all with professional obligations and duties of care. By the time an application reaches CIMA for review, it has been stress-tested by at least 18 professional counterparties, many of them the same household-name firms you would find in any other major reinsurance jurisdiction.

That is not a light-touch system. That is a deeply layered one.

Usually, a U.S. onshore law firm is the first to be engaged by a cedant or an asset manager contemplating a reinsurance transaction, whether onshore or offshore. Many of those same law firms have working relationships with offshore law firms. Lawyers will have a seat at the table prior to licensing, throughout structuring and likely post-licensing.

Tax advisers onshore are usually engaged early in the process, working closely on structuring whilst working hand-in-hand with the lawyers. Those same tax advisers will also work on any ongoing tax returns of the reinsurance company.

The cedant will have internal actuarial staff modelling what a transaction might look like; the asset manager will also have actuarial support working on their modelling, such that by the time a transaction is taking shape we have buy-side and sell-side actuaries engaged. A CIMA approved actuary and peering reviewing actuary will also be required. We will similarly then see ALM work being done as the matching of assets and liabilities takes shape.

By the time CIMA reviews an application with their own analyst, this will also be overseen by an actuary.

Should an insurance manager or adviser be involved (depending on B(iii) or Class D insurer licence) they would have a role in stewarding the structure throughout the licensing process and its active life post-licensing. Licensees are often subject to regulatory inspection, usually every two to three years.

Auditors must provide consent to act in advance of the application and are themselves subject to various professional obligations throughout their engagement.

Many life and annuity reinsurance transactions are sourced or facilitated by the brokerage community – primary, reinsurance or retro.

CIMA is responsible for setting and maintaining the regulatory standards to which we all operate. Roles and responsibilities of all contracted parties are laid out in statements of guidance that supplement professional obligations.

The licence application when submitted is reviewed by CIMA in what has become an interactive and in most cases an iterative engagement with most applicants. Usually, applicants will meet CIMA before submitting and lay out their business rationale for establishing the reinsurance company.

The composition of the investment portfolio is submitted to CIMA as part of the licence application, and CIMA will robustly challenge it in terms of concentration, composition and diversification.

The governance obligations of boards and directors are far more onerous than they used to be. B(iii) and Class D reinsurance approvals in Cayman now come with a requirement that within six months there is an appointed independent non-executive director to the board. These INEDs typically come with deep actuarial, asset management or governance experience and must be approved persons from a CIMA perspective.

CIMA also places clear emphasis on the suitability and qualification of individuals occupying key control functions, including roles such as the chief risk officer or chief compliance officer. These requirements are designed to reinforce robust risk management, enhance board independence, and align Cayman reinsurers with internationally recognised governance expectations.

On transparency and collateral

Some critics have suggested that when liabilities migrate to Cayman, US regulators lose visibility. This misrepresents how cross-border reinsurance actually works.

Every reinsurance transaction involving a Cayman reinsurer and US counterparty operates under the oversight of at least two regulators – CIMA and the home state regulator of the US cedant. CIMA will not approve a transaction without consulting the relevant home state regulator. The home state regulator has full visibility into the proposed treaty terms, asset and liability composition, and collateralization arrangements.

And on collateral: Cayman reinsurers are not simply posting 100% of US statutory reserves. In practice, collateral typically runs at 103–105%. That is not a vulnerability. That is overcollateralization providing an additional buffer for US policyholders that external commentators have conspicuously failed to mention.

Correcting the record on IAIS

One specific claim in recent commentary requires direct correction. It has been stated that Cayman has “opted out” of the IAIS global monitoring exercise. This is factually wrong.
The GME applies to Internationally Active Insurance Groups, designated as such by the IAIS. CIMA is not the home regulator for any IAIGs. Cayman’s non-participation reflects the straightforward mechanics of how the framework operates – not a lack of engagement or
alignment with international standards. Presenting it otherwise to a regulatory audience that knows how the GME works is, at minimum, a significant oversight.

On capital and reserving

Cayman applies a defined capital regime. The prescribed capital requirement forms the basis of each reinsurer’s capital framework, set with CIMA at licensing and subject to ongoing supervision above the statutory minimum capital requirement. All reinsurers file audited financial statements annually. Long-term writers must submit independently prepared and peer-reviewed actuarial valuation reports. Class D licensees publish audited financials; Class B(iii) licensees provide them to insureds and third-party beneficiaries on request.

Key control functions including CRO and CCO roles carry explicit suitability and qualification requirements.

This is not an absence of prescribed standards. It is a risk-based framework that is rigorous, proportionate, and aligned with IAIS Insurance Core Principles.

Where Cayman is going

We acknowledge openly that Cayman is not yet the finished article. We are not currently an NAIC Qualified Jurisdiction or Solvency II equivalent – and we are not pretending otherwise.

What we are doing is pursuing NAIC Qualified Jurisdiction status through a rigorous, multi-year process that requires demonstrable equivalence with US regulatory standards across solvency, supervision, enforcement and transparency.  Premier André Ebanks has confirmed this is a funded priority for 2026 and 2027. CIMA is actively engaged. The process is underway.

It is worth asking a simple question: Why would a jurisdiction voluntarily subject itself to that level of scrutiny unless it was confident in the robustness of its framework? The pursuit of QJS is itself the answer to many of the questions being raised.

Adrian Lynch is Founding Partner and CEO of Blue Ocean Reinsurance Group. He has spent 16 years of his Cayman career in leadership roles in Aon and Artex.