30 October 2014

By John Dykstra, Abraham Thoppil Maples and Calder

*The authors would like to thank Audrey Rankin for her assistance with the preparation of this paper.

This chapter first appeared in the first edition of Insurance & Reinsurance Law & Regulation, published by Thomson Reuters in September 2014 as part of The European Lawyer Reference series.

In this chapter, John Dykstra and Abraham Thoppil provide an overview of the regulations and regimes governing insurance and reinsurance in the Cayman Islands. Their contribution formed part of the first edition of Insurance & Reinsurance Law & Regulation, published by Thomson Reuters as part of The European Lawyer Reference series.

1. WHAT RISKS MUST BE INSURED?

1.1   What are the compulsory classes of insurance?

1. Under the Air Transport (Licensing of Air Services) Regulations, 1977, every applicant for a licence to operate a scheduled service needs to submit proof of insurance of the aircraft for the proposed route. Also, every applicant for a series of non-scheduled passenger services must submit proof that the applicant is certified, licensed and insured in accordance with the regulations of the state of registry. Such insurance may be provided by a foreign insurer provided that the aircraft is not ordinarily based in the Cayman Islands (see section 1.2.2 below for a definition of ‘domestic business’). If the aircraft is ordinarily based in the Cayman Islands, such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from the Cayman Islands Monetary Authority (CIMA) to place insurance coverage with such foreign insurer.
2. Under the Banks and Trust Companies Law (2013 Revision), a licensee holding a Trust Licence is required to maintain adequate professional indemnity insurance or have in place other appropriate arrangements to cover risk. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to

place insurance coverage with such foreign insurer.

3. Under the Builders Law, 2007 (not yet in force; awaiting commencement order), the Builders Board may refuse to register an entity if the business entity concerned does not have public liability insurance at all or has

it to such extent as may be prescribed in regulations made under the Builders Law. No regulations have been published by the Governor in Cabinet to date. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.

4. A person licensed under the Companies Management Law (2003

Revision) is required to insure against all losses arising from claims of civil liability incurred in connection with the business of company management. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.

5. Under regulations enacted under The Customs Laws (2012 Revision), keepers of warehouses referred to in The Customs (Bonded Warehouses) Regulations (2011 Revision) and Customs (Bonded Warehouses) (Amendment) Regulations, 2012 are required to cover risks in respect of goods in the bonded warehouse by way of bond with a recognised bank or insurance company. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.
6. Under the Dangerous Substances Handling and Storage Law, 2003,

the Governor in Cabinet may make regulations dealing with a written guarantee to the government or compulsory insurance to be taken by persons engaged in the handling, storage or transportation of dangerous substances against claims for damages by third parties or the general public. No regulations have been published by the Governor in Cabinet to date. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to

place insurance coverage with such foreign insurer.

7. Under the Directors Registration and Licensing Law 2014, licensed professional directors and corporate directors are required to maintain a minimum level of insurance cover.
8. Under the Health Insurance Law (2013 Revision), every employer is obliged to effect and continue on behalf of each of his employees and any child and unemployed spouse of an employee a standard health insurance contract. The obligation on an employer is to effect a standard health contract, which is issued by an approved insurer and which complies with the relevant requirements prescribed by the Health Insurance Regulations (2013 Revision). An approved insurer must be an insurer licensed under the Insurance Law, 2010 (the Insurance Law) as

a Class A insurer and approved by the Health Insurance Commission to provide standard health insurance contracts. Such insurance may only be provided by a foreign insurer if a subsidiary, associated or affiliated entity registered or incorporated in the Cayman Islands that is directly or indirectly controlled by the foreign insurer (as a parent company), or an entity registered or incorporated in the Cayman Islands, respectively, is an exempted company and its employees are not ordinarily resident in the Cayman Islands.

9. Under the Health Practice Law (2013 Revision), operators of a healthcare facility must (i) provide malpractice insurance or indemnity cover approved by the Health Practice Commission; (ii) ensure adequate liability insurance coverage for the healthcare facility; and (iii) ensure that persons who work at the facility under a contract of services with the healthcare facility have adequate malpractice and other relevant insurance, and such malpractice insurance, liability insurance, indemnity cover and any other relevant insurance shall be obtained from an authorised insurer. Under the Health Practice Law (2013 Revision), ‘authorised insurer’ means: (i) an insurer licensed under the Insurance Law to carry on insurance business within the meaning of that law; or (ii) any other person or organisation approved by the Health Practice Commission to provide medical or any other type of indemnity cover in the Islands. Accordingly, subject to approval by the Health Practice Commission, such insurance (medical malpractice) may be provided by a foreign insurer subject to the limitations discussed in 1.2.2 below.
10. Under the Insurance Law, an insurance broker or insurance manager shall maintain in force, and comply with the conditions of cover of, professional indemnity insurance placed with an insurer licensed to carry on domestic business and provide for an indemnity of not less than 820,000 Cayman Islands dollars (US$1,000,000) for any one loss, or such other figure as may be prescribed by CIMA. Such professional indemnity insurance shall extend to include the activities conducted on behalf of the broker or insurance manager and be subject to review by CIMA. In the event that such professional indemnity insurance is invalidated, becomes voidable or is withdrawn, cancelled or not renewed, the licensee shall immediately notify CIMA and shall forthwith cease to solicit further insurance business until such professional indemnity insurance has been reinstated or replaced. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.
11. Under the Legal Practitioners (Incorporated Practice) Regulations (2006

Revision), a body corporate carrying on business consisting of the provision of professional services such as are provided by individuals practising as attorneys shall insure with authorised insurers for all losses arising from claims in respect of civil liabilities incurred in the practice of the recognised corporate body by (i) the recognised corporate body; or (ii) by any of its officers or employees, or former officers or employees. Under this law, ‘authorised insurer’ means an insurer licensed under the Insurance Law to carry on insurance business within the meaning of that law, or any other insurer approved by the Attorney-General.

2. Under the Merchant Shipping Law (2011 Revision), every ship registered in the Cayman Islands must carry insurance cover against risks of loss or damage to third parties, and in particular in respect of the shipowner’s liabilities to a crew member and claims in respect of loss or damage caused by any cargo carried on board the ship. Every ship anchoring in or trading in or from Cayman Islands waters or entering a port in the Cayman Islands shall carry insurance cover against risks of loss or damage to third parties, and against wreck removal expenses.
3. Under the Merchant Shipping (Marine Pollution) Law, 2001, every ship registered in the Cayman Islands shall carry insurance cover against risks of loss or damage to third parties, and in particular: (i) in respect of the shipowner’s liabilities to a crew member under the Merchant Shipping Law (2011 Revision); and (ii) claims in respect of loss or damage caused by any cargo carried on board the ship as provided under the Merchant Shipping Law (2011 Revision). Every ship anchoring in or trading in or from Cayman Islands waters or entering a port in the Cayman Islands shall carry insurance cover against risks of loss or damage to third parties, and against wreck removal expenses in an amount satisfactory to the Receiver of Wreck appointed under the Merchant Shipping Law (2011 Revision). Non-government ships are required to have compulsory insurance against liability for pollution. Such insurance may be provided by a foreign insurer provided that the ship is not ordinarily based in the Cayman Islands (see the definition of ‘domestic business’ in section 1.2.2 below). If the ship is ordinarily based in the Cayman Islands, such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.
4. Under The Merchant Shipping (Oil Pollution) (Cayman Islands) Order

1998 and The Oil Pollution (Compulsory Insurance) Regulations, 1976, non-government ships are required to have compulsory insurance against liability for pollution. Ships shall not enter or leave a port in the Cayman Islands, or, if the ship is registered in the Cayman Islands, enter a port in another country or a terminal in the territorial sea of another country, unless there is in force a policy of insurance complying with The Merchant Shipping (Oil Pollution) (Cayman Islands) Order

1998 and The Oil Pollution (Compulsory Insurance) Regulations. Such insurance may be provided by a foreign insurer provided that the ship is not ordinarily based in the Cayman Islands (see section 1.2.2 below – definition of ‘domestic business’). If the ship is ordinarily based in the Cayman Islands, such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.

5. Under the Vehicle Insurance (Third Party Risks) Law (2012 Revision), users of vehicles on a road are required to be insured against third party risks by an insurer licensed as a Class A insurer. This includes a vehicle provided for the purposes of an instructional ability and fitness test as per The Traffic (Driving Instruction) Regulations, 2012. As the Vehicle Insurance (Third Party Risks) Law (2012 Revision) mandates a Class A insurer, such insurance cannot be provided by a foreign insurer.
6. Under The National Gallery Law, 1999, the National Gallery Management Board shall insure the works of art in the national collection against theft, damage or loss. Accordingly, subject to approval by the Governor in Cabinet, such insurance may be provided by a foreign insurer.
7. Under the Petroleum Handling and Storage Law (1996 Revision), the Governor in Council may make regulations for compulsory insurance cover to be taken out regarding the storage, handling or transportation of petroleum. Under the Petroleum Regulations (1998 Revision), the Government of the Cayman Islands may require a contractor to take out and maintain such form of contract of insurance (as the Governor in Cabinet may approve) against any liability the contractor may

incur so that the contractor shall, at all times, keep the Government of the Cayman Islands effectually indemnified against all proceedings, costs, charges, claims and demands whatsoever which may be brought against the Government of the Cayman Islands by any third persons in relation to or in connection with a petroleum agreement (made under the Petroleum Law (1998 Revision)) or any matter or thing done or purporting to be done in pursuance thereof. Accordingly, subject to approval by the Governor in Cabinet, such insurance may be provided by a foreign insurer.

8. Under the Port Regulations (2013 Revision), users of port facilities must carry bodily injury liability insurance and property damage liability insurance. Such insurance may be provided by a foreign insurer provided that the ship using the port facility is not ordinarily based in the Cayman Islands (see section 1.2.2 below – definition of ‘domestic business’). If the ship is ordinarily based in the Cayman Islands, such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.
9. Under the Traffic (Public Passenger Vehicles) Regulations (2013

Revision), an applicant for a permit for an omnibus or a taxi must comply with the Traffic (Public Passenger Vehicles) Regulations, 2013 and produce satisfactory evidence that there is in force in relation to the proposed vehicle a policy of insurance of such security (i) to comply (in respect of that use) with the requirements of the Vehicle Insurance (Third Party Risks) Law (2012 Revision); and (ii) to provide such insurance coverage lastability in respect of the death of, or bodily injuries to, the passengers as may be specified in a direction by the Governor in Cabinet generally in relation to particular categories of vehicles. As the policy of insurance needs to comply with the requirements of the Vehicle Insurance (Third Party Risks) Law (2012 Revision), which in turn mandates a Class A insurer, such insurance cannot be provided by a foreign insurer.

1. Under the Securities Investment Business (Conduct of Business) Regulations 2003, a person licensed under the Securities Investment Business Law (2011 Revision) must maintain insurance to cover at least: (i) professional indemnity; (ii) the professional liability of senior officers and corporate secretaries; and (iii) business interruption. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.
2. Under the Strata Titles Registration Law (2013 Revision), a Strata corporation has a duty to, amongst other things, insure and keep insured the building to the replacement value thereof against fire, earthquake, hurricane and such other risks as may be prescribed, unless the proprietors by unanimous resolution determine otherwise. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.
3. Under the Registered Land Law (2004 Revision) there shall be implied

in every charge, unless the contrary is expressed therein, agreements by the chargor with the chargee binding the chargor to insure and keep insured all buildings upon the charged land or comprised in the charged lease against loss or damage by fire or hurricane in the joint names of the chargor and chargee with insurers approved by the chargee to the full value thereof. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.

3. The Monetary Authority Law (2013 Revision) gives CIMA the power to set out policies and procedures in a regulatory handbook (the Regulatory Handbook). Policy F4, sections 2.1 and 2.6 of the Regulatory Handbook require auditors of entities regulated by CIMA to hold professional indemnity insurance. Such insurance may be provided by a foreign insurer subject to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.
4. Under the Insolvency Practitioners’ Regulations 2008 and the Insolvency Practitioners’ (Amendment) Regulations, 2010, a qualified insolvency practitioner shall not be appointed by the court as the official liquidator of any company unless he and the firm of which he is a partner or employee or the company of which he is an employee has professional indemnity insurance (up to a limit of at least US$10 million in respect of each and every claim and at least US$20 million in the aggregate, with a deductible of not more than US$1,000,000) applicable to the negligent performance or non-performance of his duties as an official liquidator generally. Such insurance may be provided by a foreign insurer subject

to the limitations discussed in section 1.2.2 below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with such foreign insurer.

1.2   Who must they be insured with?

1.2.1 Locally admitted insurers

See 9, 15 and 19 under section 1.1 above.

1.2.2 Foreign insurers

See section 1.1 above for compulsory classes of insurance that may be provided by a foreign insurer (where noted) subject to the limitations discussed below or if a locally licensed insurance broker has obtained a special dispensation from CIMA to place insurance coverage with the foreign insurer.

Under the Insurance Law, a Class A insurer’s licence (granted by CIMA) is required for the carrying on of (i) domestic business by either a local insurer or an external insurer; or (ii) limited reinsurance business. Under the Insurance Law:

• ‘domestic business’ means insurance business where the contract is in respect of the life, safety, fidelity or insurable interest, other than in respect of property, of a person who at the time of effecting the contract is ordinarily resident in the Cayman Islands, or property that at the time of effecting the contract is in the Cayman Islands or, in the case of a vehicle, vessel, aircraft or other movable property is ordinarily based in the Cayman Islands;
• ‘local insurer’ means a Class A insurer, incorporated in and having its place of business in the Islands;
• ‘external insurer’ means a Class A insurer who is not a local insurer and whose principal or registered office is in a jurisdiction outside the Islands where the legislation for the regulation and supervision of insurers is acceptable to CIMA; and
• ‘reinsurance business’ means the business of accepting risks by effecting or carrying one or more contracts of reinsurance whether directly or indirectly, and includes running-off business, including the settlement of claims.

Although ‘carrying on business’ is not statutorily defined in the Cayman Islands, English case law (which would be persuasive but not binding before a Cayman Islands court) suggests that a business is carried on where there is some degree of physical presence (or where as a factual and legal matter business contracts are negotiated or concluded) and the activity is on a repeated basis. Therefore on the basis that: (i) activities are provided wholly from outside of the Cayman Islands; (ii) any marketing activities in the Cayman Islands will relate solely to the provision of information to prospective insureds, but no agreements will be signed in the Cayman Islands; (iii) marketing trips, if any, are conducted in a one-off trip of a few days to pre-selected insureds; and (iv) no transactions are concluded in the Cayman Islands, insurance activity conducted in the Cayman Islands by a foreign insurer should not constitute the carrying on of a business ‘within the Cayman Islands’ under the Companies Law (2013 Revision), the Trade and Business Licensing Law (2007 Revision) or the Local Companies (Control) Law (2007 Revision). It therefore should not be necessary for the foreign insurer to register in the Cayman Islands under such laws (unless it is otherwise connected with the Cayman Islands), nor should it be necessary to obtain any local business licences. Points (i)–(iv) above are collectively referred to herein as the Guidelines. In the event that the Guidelines cannot be strictly followed, this does not mean per se that the foreign insurer must be registered and/or licensed. Ultimately, what constitutes ‘carrying on business’ is an issue to be determined by reference to the specific circumstances and may need to be advised upon on a case-by-case basis.

The Attorney General or the Governor in Cabinet, as the case may be, may in certain circumstances permit a foreign insurer to carry on domestic business.

2. WHO CAN INSURE NON-COMPULSORY CLASSES OF RISK?

2.1   Locally admitted insurers

Yes.

2.2   Foreign insurers

If it is a ‘domestic business’ as defined in section 1.2.2 above, then a foreign insurer will need to be licensed under the Insurance Law. If not a domestic business, then such insurance may be provided by a foreign insurer without having to obtain any local business licences.

The Attorney General or the Governor in Cabinet, as the case may be, may in certain circumstances permit a foreign insurer to carry on domestic business.

See also the discussion in section 1.2.2 above on the Guidelines relating to

‘carrying on business’.

CIMA may grant a special dispensation for a fixed period to an insurance broker to place a contract of domestic business with one or more insurers that are not licensed under the Insurance Law where:

• the foreign insurer has not been refused a licence under the Insurance

Law;

• CIMA is satisfied that the foreign insurer is fit and proper;
• the proposed volume of domestic business to be placed with the respective foreign insurer is inadequate to support the payment of Class A licence fees or that some other good and sufficient reason exists; and
• the foreign insurer can demonstrate to the satisfaction of CIMA an evident need (in terms of additional capacity or policy coverage, or otherwise) that the business be so placed.

The foreign insurer shall further nominate at least one person resident in the Cayman Islands and approved by CIMA who is authorised to accept on its behalf service of process in any legal proceedings and any notices required to be served on it. Such dispensation is granted on a case-by-case basis only and is subject to review at such intervals as CIMA may specify. The application process may take several weeks. CIMA will provide written confirmation upon issuance of the dispensation.

2.3   Excess and surplus lines markets

Locally admitted or foreign insurers (subject to the limitations discussed in section 1.2.2) may insure in the excess and surplus lines markets.

3. WHICH REINSURERS CAN BE USED?

3.1   Must they be locally admitted?

Reinsurers do not need to be locally admitted. However, CIMA consent/notification requirements exist. See section 2.2 above.

Persons carrying on or desiring to carry on insurance business in or from within the Cayman Islands need to be licensed under the Insurance Law. The Insurance Law defines ‘insurance business’ as the business of accepting risks by effecting or carrying insurance, whether directly or indirectly, and includes running-off business, including the settlement of claims.

For the purposes of the Insurance Law, a person shall not be considered to be carrying on insurance business solely by reason of the fact that the person effects or carries out a contract of reinsurance with an insurer in the Cayman Islands unless the person’s principal place of business is in the Cayman Islands. Accordingly, there is no requirement for the foreign reinsurer to be registered or licensed in the Cayman Islands in order to enter into a reinsurance contract with the local insurer.

3.2   If not, are security requirements imposed?

See section 3.1 above.

4. THE TAXATION OF INSURANCE

4.1   What taxes are levied on insurance premium?

The Cayman Islands have no premium taxes.

4.2   What exceptions are there?

Stamp duty of US$14.63 is payable for a policy of insurance (other than life insurance and property insurance). The maximum stamp duty payable on a policy of life assurance is US$243.90. The stamp duty payable on

local property insurance is 2 per cent of the cost of the property insurance premiums.

If the contract is brought in or executed as a deed in the Cayman Islands, stamp duty of US$50 is payable.

5. INSURANCE REINSURANCE AND CAPITAL MARKETS

5.1   How is finite reinsurance treated?

5.1.1 What constitutes risk transfer?

The Cayman Islands is a leading insurance and alternate risk transfer domicile. Under the Insurance Law, ‘insurance business’ means the business of accepting risks by effecting or carrying out contracts of insurance, whether directly or indirectly, and includes running-off business, including the settlement of claims.

The Insurance Law requires the maintenance of adequate arrangements for the management of risk considerations. Solvency and capital adequacy to match the risk transfer criteria will depend on the specifics of the transaction.

5.2   Derivatives, ILWs and wagering agreements

5.2.1 What constitutes insurable interest?

The concept of insurable interest, introduced by statute in some other jurisdictions, has not been similarly introduced into Cayman Islands insurance law. There is no statutory requirement in Cayman Islands law that there be an insurable interest in an insurance contract. However, atcommon law, the cases support the proposition that the courts would infer a requirement for an insurable interest in a policy of indemnity for loss.

The regulations under the Insurance Law include a provision that makes it clear that derivatives and similar arrangements do not constitute insurance business:

‘Unless a person would otherwise be regarded as carrying on insurance business but for this regulation such person shall not be considered to carry on insurance business solely by reason of the fact that he effects or carries out an contract (including, without limitation, an option contract, credit default swap contract, total return swap contract, futures contract, forward contract, swap contract, derivative contract, and a contract for differences or security) the purpose of which is to secure a profit or avoid a loss by reference to –

• fluctuations in the value of price of property of any description; or
• an index or other factor, or the occurrence of a particular event, specified for that purpose in the contract,

and in either case where such contract is entered into on the basis that the obligation of one party to pay the other party is not contingent, whether that be express or implied, upon the other party suffering a loss or otherwise being exposed to the risk of loss in relation to the subject matter of such contract.’

5.3   Side cars and CAT bonds

5.3.1 To what extent are these governed by the law relating to insurance contracts?

Side cars – where the side car is structured to issue insurance cover pursuant to one or more insurance policies, it is necessary to obtain an insurance licence from CIMA. Assuming the side car is fully collateralised, it would obtain a Class C Insurance Licence. As a Class C licensee, the side car would need to be administered by a licensed insurance manager.

CAT bonds – where the CAT bond issuer is structured to issue insurance cover pursuant to one or more insurance policies, it is necessary to obtain an insurance licence from CIMA. As CAT bond transactions are fully collateralised limited recourse transactions, a CAT bond issuer would obtain a Class C Insurance Licence. As a Class C licensee, the CAT bond issuer needs to be administered by a licensed insurance manager.

5.4   Other ILS and ART products

The Insurance Law is designed to be flexible and responsive to innovation in the insurance market. The particular insurance licence that is required for a particular ILS/ART product will depend upon the specific details of the particular transaction.

6. COMMISSIONS

6.1   What commissions and brokerages are permissible? What disclosure of commissions is required?

Under the Insurance Law, an insurance broker must, in respect of domestic business, submit a list of all insurers for whom the insurance broker is authorised to act, commissions received from each insurer and the premium income received on behalf of and remitted to each such insurer during the

financial year.

Under the Insurance (Reporting) Regulations, 2013, an insurer must submit a Domestic Underwriting Report which covers commissions paid.

7. HOW ARE AGENTS (BROKERS AND UNDERWRITING AGENTS AND THIRD PARTY CLAIMS ADMINISTRATORS) REGULATED?

Under the Insurance Law, an insurance agent, broker and manager are regulated by CIMA. Each must be a holder of a valid insurance licence as required under the Insurance Law. Depending upon the circumstances, third party claims administrators may be subject to further regulation.

8. IS TAKAFUL POSSIBLE?

Yes. Cayman Islands law is flexible enough that it is possible to achieve a

Sharia-compliant product such as takaful.

9. WHAT SCOPE IS THERE FOR MICROINSURANCE?

This is possible.

1. EXIT SOLUTIONS – WHAT SOLUTIONS ARE AVAILABLE AND HOW DO THEY OPERATE? HOW ARE FOREIGN SOLUTIONS RECOGNISED?

10.1 Portfolio transfer

See section 10.2 below.

10.2 Statutory portfolio transfer

Under the Insurance Law, a transfer or amalgamation of the whole, or any part, of the long-term business of any insurer to another insurer shall only be effected in accordance with the approval of CIMA. CIMA may approve the proposed transfer as presented or subject to such terms and conditions as it sees fit, having regard to the rights and interests of all policyholders affected by the transfer and all the circumstances of the case.

10.3 Novation

A novation constitutes a material business plan change that requires CIMA’s prior approval pursuant to the Insurance Law.

10.4 Commutation

A commutation constitutes a material business plan change that requires

CIMA’s prior approval pursuant to the Insurance Law.

10.5 Policy buy-back

A policy buy-back is possible subject to CIMA’s prior consent and notification requirements.

10.6 Solvent scheme

A solvent scheme is possible subject to CIMA’s prior consent and notification requirements.

10.7 Assignment

An assignment constitutes a material business plan change that requires

CIMA’s prior approval pursuant to the Insurance Law.