Portfolio Insurance Companies and the Updated Beneficial Ownership Regime | Conyers

The Beneficial Ownership Transparency Act, 2023 (the “BOT Act”), Beneficial Ownership Transparency Regulations, 2024 (the “BOT Regulations”) and the Guidance on Complying with Beneficial Ownership Obligations in the Cayman Islands (the “BOT Guidance”) all came into force on 31 July 2024, with enforcement suspended until 1 January 2025. As we count down to the January deadline, we take a closer look at how the updated beneficial ownership regime applies to the nearly 60 portfolio insurance companies (PICs) registered pursuant to the Insurance Act, 2010 (as amended).

What’s changed for PICs?

Under the previous beneficial ownership regime, PICs were able to rely upon an exemption from the requirement to maintain a beneficial ownership register on the basis that it is a subsidiary of a legal entity that holds a licence under a regulatory law. This is because the voting controlling shares in a PIC are owned by a controlling relevant insurer licensed under the Insurance Act, 2010 (as amended). Therefore, a PIC was previously only required to provide written confirmation of the exemption to the Registrar of Companies, along with details of its controlling relevant insurer holding the Cayman Islands Monetary Authority (CIMA) insurance licence.

Under the new BO Regime, the previous exemptions have been removed and replaced with slightly narrower alternative routes to compliance, through which certain entities are able to achieve compliance by providing certain information as required under the applicable route to compliance.

The alternative routes to compliance under the new regime broadly correspond to previous exemptions, so that, instead of maintaining a beneficial ownership register, any legal entity licensed under a regulatory law is able to avail itself of an alternative route to compliance by providing the Registrar of Companies with details of its licence number and the regulatory law under which it is licenced.

However, the BOT Act and BOT Regulations do not provide for the subsidiaries of licenced entities to rely upon this alternative route to compliance. The BOT Guidance also confirms that subsidiaries of licensed entities are not eligible to rely upon this alternative route to compliance by virtue only of the parent company’s status as a licensed entity.

This leaves a slight lack of clarity and potential inconsistency in the BO Regime’s application to PICs, given that technically a PIC does not hold (and is explicitly not required to hold) its own licence issued by CIMA in order for a PIC to carry out insurance business from within the Cayman Islands. Instead, a PIC is authorised to operate under the licence of its parent (the controlling relevant insurer) and is registered with CIMA as opposed to licensed.

Reliance by a PIC on an alternative route to compliance

The reason that the BO Regime allows certain entities to rely on alternative routes for compliance is because those entities are already subject to transparency requirements to provide evidence of beneficial ownership to a centralised function where such information is held and maintained. For entities such as insurers that are licensed under the Insurance Act, 2010 (as amended), these requirements are fulfilled under the regulatory licensing regime whereby beneficial ownership information is submitted to and held by CIMA.

Crucially, a PIC is subject to the same due diligence obligations in respect of its beneficial owners as a fully licensed insurer. Since CIMA holds that information and may share it with key investigative bodies where necessary (as it may for its licensees generally), we consider that the reason for the alternative route to compliance being available to licensees is equally satisfied in respect of a PIC as it is for a licensed insurer.

It’s also worth noting that a PIC is treated as if it were a licensed insurer in most key respects under the Insurance Act, 2010 (as amended), whereby: (1) CIMA, auditors and insurance managers hold the same powers and duties over a PIC as for a licensed insurer; and (2) the PIC owes the same obligations as a licensed insurer in relation to CIMA, auditors, insurance managers and its own operations (including as to solvency, capital requirements and governance). A PIC’s operation is also closely tied to its controlling relevant insurer as it must engage the same insurance manager and maintain the same registered office as its controlling relevant insurer.

For these reasons, Conyers’ view is that a PIC should be able to achieve compliance with the BOT Act and BOT Regulations on the basis that it is licensed under a regulatory law through its controlling relevant insurer and that the basis for the alternative route to compliance is satisfied.

Practically, we recommend that where PICs provide the relevant information to their corporate service provider and/or the Registrar of Companies in order to meet the alternative route to compliance, it may assist to provide the PIC’s registration number with CIMA rather than its parent’s licence number, as this will allow CIMA and/or the Registrar to identify the correct relevant beneficial ownership information in the event that this is requested by a relevant authority.

Watch this space!

The Conyers team has been in contact with the Ministry of Financial Services and Commerce setting out our views and seeking definitive confirmation that a PIC may rely on an alternative route to compliance on the basis that it is licensed under a regulatory law through its controlling relevant insurer.

We understand that the Ministry is considering the position, whilst it takes stock of how the regime is bedding in since the deadline for compliance passed on 1 January 2025. We will closely monitor any updates and the beneficial ownership reporting process for PICs taking place under the BO Regime.

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