Due to the dynamic nature of the insurance industry, insurers or reinsurers established in the Cayman Islands as Segregated Portfolio Companies ("SPC") might look to leverage the added risk management benefits of a Portfolio Insurance Company ("PIC").
As a recognised leader in the insurance sector, Conyers Dill & Pearman is well-placed to advise you on the structuring, formation and operation of your PIC. Curious to know if a PIC might be helpful for you?
Let's start by taking a look at how PICs are structured
A PIC is an additional underwriting platform that allows insurers to structure insurance and reinsurance programmes in a more advantageous and streamlined manner. They are incorporated as a subsidiary of a segregated portfolio or cell of an SPC – a process which can be completed within 24 hours.
A PIC is a standard Cayman Islands exempted company controlled by the relevant SPC on behalf of one of its cells. Any existing or new cell can establish a PIC and there is a limit of one PIC per cell. The cell holds voting but non-participating shares in the PIC. Relevant third parties may be separately issued participating shares, which have rights to dividends but are non-voting. A PIC can then carry on insurance business separate to that of its controlling SPC. PICs are regulated by the Cayman Islands Monetary Authority ("CIMA") and require their own business plan. They must register with CIMA but do not require a separate licence from CIMA, as they are covered by the SPC's insurance licence.
Not being separate legal entities, cells cannot contract with one another. PICs, however, have corporate personality and a PIC may enter into contracts with the controlling SPC, other cells of the SPC and any other PIC or third party. A PIC may also have its own Board of Directors, as long as there is a minimum of two, who may be different to the Board of Directors of its controlling SPC.
Providing additional flexibility, a PIC may take a different tax election to that of its controlling SPC.
Administration is streamlined because the insurance manager and the registered office provider of the PIC must be the same as for its controlling SPC.
What are common uses for PICs?
PICs can be used to facilitate the:
- underwriting of particular business, for a particular party who can effectively run the PIC by appointing Directors to the Board of the PIC
- underwriting of a new line of business, such as life business, which is materially different to the type of business traditionally underwritten by the controlling SPC
- creation of an underwriting platform for a party not yet sufficiently large to warrant the establishment of its own captive or for whom a traditional "rent-a-captive" structure is not attractive
- winding up of an insurer by novating any remaining run-off business to a third party PIC and also thereby reducing on-going run-off costs
- future transition of a cell into a full standalone insurer or captive by following a fast track process contained in the PIC legislation
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.