By giving institutional investors more investment options, the Insurance (Amendment) Bill, 2022 is intended to strengthen the Cayman Islands’ position in international reinsurance and domestic insurance.
Speaking at the 3rd Meeting of Parliament on June 8th, Minister Ebanks said the insurance amendment proposes to introduce capital redemption contracts. These products are issued by insurance companies with fixed maturities and fixed interest rates; however, payout of the contract is not based upon the mortality of a particular person. Their key feature is that they diversify funding sources and reduce overall costs of funds for large insurance and reinsurance carriers.
Because capital redemption contracts would be underwritten by insurers, it would be regulated by the Cayman Islands Monetary Authority, Minister Ebanks said. Also, in the case of insolvency of the insurance company, contract holders would have the same protection as insurance holders.
Capital redemption contracts already are available in the UK, EU, US and Bermuda; in some jurisdictions, they are known as funding agreements. The Cayman Islands product stems from a Financial Services Legislative Committee (FSLC) proposal for Government to diversify the Islands' insurance and reinsurance sector.
*The FSLC proposes enhancements to the Cayman Islands financial services regime, for Government's consideration and potential action.