Conyers Coverage Summer 2023 ' Issue 9 ' Cayman Islands

• Published date: 26 March 2024
• Subject Matter: Corporate/Commercial Law, Insurance, Corporate and Company Law, Corporate Governance, Insurance Laws and Products, Reinsurance
• Law Firm: Conyers
• Author: Mr Derek Stenson, Philippa Gilkes, Spencer Vickers, Frank Farrell, Róisín Liddy-Murphy, Brian Blugerman, Erik Bodden, Jonathon Milne, Jarladth Travers, Nicholas Ward, Mark Mugglestone, Maddison Billinghurst and Christopher Eakin

Conyers Coverage

A warm welcome to our latest edition of Conyers Coverage. It's been a dizzying year to date for the Cayman Islands (re)insurance industry, so it's time for some updates and insights.

The momentum is real and the pipeline is strong, with a significant increase in interest following the Cayman Reinsurance Roundtable in New York in January and the Refocus conference in February. I believe we are at an inflection point in the jurisdiction and I've taken some time to reflect on the factors driving this "virtuous circle". Philippa touches on more of the micro factors as to why reinsurers are ramping up in Cayman and the rest of the team have weighed in with a host of updates on new rules and regulations including important deadline reminders and other industry news and views. We also have some topical updates from our litigation and regulatory colleagues and you'll find out more about some new team members and service offerings at Conyers.

If you'd like to know more on any of the topics discussed or learn further about what Cayman has to offer, please do reach out - we're always happy to chat.

Reflections on the Cayman Islands (Re)insurance Market - a "Virtuous Circle"
Derek Stenson, Partner

A virtuous circle describes a scenario whereby new and existing factors are included and discarded in a continuous system of improvement and self-reinforcement. Such a positive confluence of various factors continue to drive growth in the Cayman Islands insurance and reinsurance market. It's an exciting time for the jurisdiction, so I'm taking a moment to reflect on the primary drivers of this "virtuous circle" we are experiencing.

What's fuelling this "virtuous circle", you ask? [Read on here]

A Trailblazing Surplus: Knighthead Leads the Way
Derek Stenson, Partner and Nicholas Ward, Associate

Conyers, working alongside Piper Sandler & Co. as placement agent and US counsel Sidley Austin, advised Knighthead Annuity & Life Assurance Company ("Knighthead") in connection with Knighthead's issuance of up to US$50,000,000 of Series A Fixed-Rate Prescribed Capital Notes due 15 December 2042 (the "Notes"), paving the way for other insurers licensed by the Cayman Islands Monetary Authority ("CIMA") to raise capital by similar means and for similar purposes.

This was a landmark transaction, marking the first time such instruments have been issued by a Cayman Islands domiciled entity and the first time CIMA has been asked to consider and approve such a transaction involving one of its licensed insurers. Moreover, it builds on the introduction to the Cayman Islands licensed insurer's toolkit last year of 'capital redemption contracts' - see our previous briefing paper here.

The Notes - rated by both A.M. Best and Kroll Bond Rating Agency, LLC - have a similar character and bear terms substantially similar to "surplus notes" popular for a long time in the US insurance market. Such instruments may, under statutory accounting principles, be classified as equity on the basis of their subordinate nature and are characterised in particular by a requirement to obtain approval from the relevant regulatory body to make each and any payment of principal or interest in the case of the Notes.

It is expected that the proceeds from this Notes issuance will be used for general corporate and working capital purposes, to support growth and the fulfilment of Knighthead's strategic objectives - potentially including the assumption of additional reinsurance and merger & acquisition activity - without dilution of existing equity holders.

Five Reasons Reinsurance is Ramping Up in Cayman
Philippa Gilkes, Counsel

Whilst traditionally the Cayman Islands has deservedly been recognised as a leading captive jurisdiction, around 70% of all licences issued by the Cayman Islands Monetary Authority ("CIMA") in recent years have been for commercial or affiliate reinsurers, with private equity groups, traditional reinsurance and insurtech increasingly selecting Cayman for the establishment of side cars and reinsurance platforms. The confidence in the jurisdiction has been evidenced by the entry of larger players in the life & annuity space, including RBC Re's redomicile from Barbados to Cayman in 2021 and Talcott Re's establishment of a reinsurer which effectively doubled...