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This document establishes the Cayman Islands Monetary Authority\u2019s (the \u201cAuthority\u201d or \u201cCIMA\u201d) Rule on Investment Activities of Insurers (\u201cthe Rule\u201d). The Rule should be read in conjunction with the following: a) Statement of Guidance on Investment Activities of Insurers; b) Insurance Act, (as amended); c) Insurance (Capital and Solvency) (Class A Insurers) Regulations, 2012; d) Insurance (Capital and Solvency) (Class B, C and D Insurers) Regulations (2018 Revision); e) Rule on Risk Management for Insurers; f) Statement of Guidance: Outsourcing Regulated Entities; g) all relevant insurance regulations; and h) any other relevant laws and regulatory instruments issued by the Authority from time to time.\", \"element\": \"section\", \"heading\": null}, {\"eId\": \"sec_2\", \"num\": \"2.\", \"text\": \"Statement of Objectives 2.1. To set out regulatory investment requirements for Insurers that consider solvency and all relevant risks.\", \"element\": \"section\", \"heading\": null}, {\"eId\": \"sec_3\", \"num\": \"3.\", \"text\": \"Statutory Authority 3.1. The measure is consistent with the Authority\u2019s statutory objectives as prescribed in the Monetary Authority Act (2020 Revision) (as amended) (\u201cMAA\u201d) at Section 34(1)(a) which states that: \u201cAfter private sector consultation and consultation with the Minister charged with responsibility for Financial Services, the Authority may \u2013 (a) issue or amend rules or statements of principle or guidance concerning the conduct of licensees and their officers and employees, and any other persons to whom and to the extent that the regulatory laws may apply.\u201d\", \"element\": \"section\", \"heading\": null}, {\"eId\": \"sec_4\", \"num\": \"4.\", \"text\": \"Scope of Application 4.1. This Rule applies to all Insurers and registered Portfolio Insurance Companies supervised by the Authority in accordance with the Insurance Act, (as amended).\", \"element\": \"section\", \"heading\": null}, {\"eId\": \"sec_5\", \"num\": \"5.\", \"text\": \"Definitions 5.1. The following definitions are provided for the purpose of this Rule: 5.1.1. \u201cInsurer\u201d has the meaning assigned in section 2 of the Insurance Act and includes PICs for the purpose of these Rules. 5.1.2. \u201cInvestment Policy\u201d means documented criteria, processes, and procedures for implementing an Insurer\u2019s investment strategy. Cayman Islands Monetary Authority Page 6 of 11 5.1.3. \u201cPortfolio Insurance Companies\u201d (PICs) has the meaning assigned under Part 4A of the Insurance Act. 5.1.4. \u201cRelated Business\u201d has the meaning assigned in section 2 of the Insurance Act. 5.1.5. \u201cRisk Management Framework\u201d refers to the totality of the systems, structures, policies and people that identify, assess, mitigate and monitor all internal and external sources of risk that could have a material impact on the Insurer. 5.1.6. \u201cRegulatory Laws\u201d refer to Acts delineated in section 2 of the Monetary Authority Act (as amended).\", \"element\": \"section\", \"heading\": null}, {\"eId\": \"sec_6\", \"num\": \"6.\", \"text\": \"Rules General Principles 6.1. An Insurer must invest its assets in accordance with the following requirements: 6.1.1 only invest in assets and instruments, the risks of which it can properly identify, measure, monitor, manage, control and report (including risks relevant to market, credit, liquidity, concentration and strategic risks as well as operational risk) and appropriately take into account in the assessment of its overall solvency needs. 6.1.2 assets must be sufficiently secure. The security of an investment is related to the protection of its value and to the preservation of its economic substance both individually and for the entire portfolio. 6.1.3 ensure that assets remain available for payments to policyholders as they fall due, along with other obligations of the Insurer. 6.1.4 ensure that assets are held in a location which does not contravene the sanction orders observed in the Cayman Islands. 6.1.5 unless otherwise required by legislation or regulations, and\/or where the Authority has determined that the assets held are of low risk, the Insurer must ensure that assets are sufficiently diversified (within and between risk categories considering the nature of liabilities) subject to the nature, scale and complexity of the business and that all asset and counterparty exposures are kept to prudent levels. Nature of Liabilities 6.2. An Insurer is required to invest in a manner that is appropriate to the nature and duration of its liabilities. In doing so, the Insurer must: 6.2.1. have regard to the extent to which the cash flows from investments match the liability cash flows in terms of timing, amount and currency, and how these change in varying conditions. 6.2.2. review and ensure that the investment guarantees, and embedded options contained in its policies are suitable. 6.2.3. ensure that assets held to cover its technical provisions and\/or capital to cover mismatching risks are invested in a manner appropriate to the nature and duration of the Insurer\u2019s insurance and reinsurance Cayman Islands Monetary Authority Page 7 of 11 liabilities and in the best interests of all policyholders, taking into account any disclosed policy objectives. 6.2.4. Manage conflicts of interests (e.g. between the Insurer\u2019s corporate objectives and disclosed insurance policy objectives) to ensure assets are invested appropriately. 6.2.5. Ensure the close matching of assets and liabilities for unit-linked or universal life policies where there is a direct link between policyholders benefits and investment funds or indices. 6.2.6. If part of an insurance group, hold investments tailored to the characteristics of the liabilities and needs of the insurance legal entity and not be subject to undue influence from the wider objectives of the group. Management of Investment Risks 6.3. An Insurer shall only invest in assets with risks it can properly assess, monitor and mitigate. The Insurer must: 6.3.1. establish and maintain a risk management framework that is appropriate to the nature, scale and complexity of the business and its proposed investment activities. 6.3.2. ensure that assets are appropriately segregated where required by the legislation or regulations, or as otherwise directed by the Authority. 6.3.3. ensure its investments, including those in collective investment funds, are sufficiently transparent and limit its investments to those where the associated risks of the asset can be properly managed by the Insurer with regard to the Insurer\u2019s overall risk tolerance and asset class diversification strategy. 6.3.4. have access to, and utilise, the requisite knowledge and skills to assess and manage the risks of its investments. Where an external investment advisor or investment manager is used, the Insurer, retains ultimate responsibility for all investments. 6.3.5. understand all the risks involved sufficiently well (including determining how material the risk from a proposed investment is) before any investments are undertaken. Assessments of risks must consider the maximum possible loss. 6.3.6. look through the structure of the investments to the underlying assets, consider the risk characteristics of the underlying assets and how this affects the risk characteristics of the investments itself. 6.3.7. if part of an insurance group, must ensure appropriate assessment and management of investments and risks involved with due regard to the needs of individual entities in addition to the group.  There must be provision for sufficient liquidity, transferability of assets and fungibility of capital within the group. Investment Policy 6.4. An Insurer must establish an Investment Policy that is appropriate to the nature, scale and complexity of the business, which must be submitted to the Authority for approval. Unless otherwise approved by the Authority, the Investment Policy must include the following information: 6.4.1. specify the nature, role and extent of its investment activities; 6.4.2. specify how it complies with rules 6.1- 6.3; Cayman Islands Monetary Authority Page 8 of 11 6.4.3. set out appropriate standards (including process and procedures) for the evaluation of all investment assets; 6.4.4. identify the Insurer\u2019s risk appetite and tolerance levels and types and characteristics of the investments; 6.4.5. describe the Insurer\u2019s investment selection criteria, standards and other parameters including the asset allocation mix across investment categories; 6.4.6. identify\/prescribe minimum and maximum limits on asset allocation by geographical areas, markets, sectors, counterparties, currency and credit quality; 6.4.7. address monitoring and control of investments, accountability for all investment transactions and investment authorization criteria and limits; 6.4.8. where the Authority has agreed to the use of financial derivatives and other structured products, the Insurer\u2019s strategy must be limited to the scope the Authority has agreed to; 6.4.9. identify processes relating to intra-group management of investment activities; 6.4.10. save for B(i) and B(ii) Insurers, identify the in-house individuals, or outsourced investment managers, who are tasked with managing the investments; 6.4.11. where an external investment advisor or investment manager is used, provide profile of the said manager criteria used for selection and engagement.; and 6.4.12. save for Class B(i) and B(ii) Insurers establish an Investment Committee to be responsible for: 6.4.12.1. maintaining the investment policy; 6.4.12.2. assessing on an annual basis (or other frequency as determined by the Authority) the suitability of the investment policy having regard to, among other things, changes in the market; and 6.4.12.3. overseeing the investment activities of the Insurer, ensuring that the risk management functions continue to be appropriate. In doing so, the committee must ensure good governance, transparency, and prevention of conflicts of interest concerning the Insurer\u2019s investment transactions and that the Insurer\u2019s operation systems, personnel and information supporting the Insurer\u2019s investments is adequate. Loans 6.5. Insurers are required to seek the approval of the Authority to provide loans or otherwise extend credit for investment purposes in accordance with the Insurer\u2019s Investment Policy. 6.6. A request for approval to the Authority must include material details regarding the loan including, the purpose, terms and conditions of the loan. Depending on the nature of the loan and the parties involved, the Authority may require a draft loan agreement to be provided. The request should provide an explanation of the risk assessment conducted by the Insurer on the borrower and details as to whether collateral is required to support the loan. Cayman Islands Monetary Authority Page 9 of 11 Internal Controls & Audit 6.7. An Insurer must have in place adequate systems of internal controls to ensure: 6.7.1. the conduct of investments activities is appropriately supervised having regard to the Insurer\u2019s size, complexity, and the nature of its investment activities; and 6.7.2. that assets are managed in accordance with the overall Investment Policy. 6.8. Save for Class B(i) and B(ii) Insurers, an Insurer shall conduct an internal audit of its investment activities which ensures timely identification of internal control weaknesses and deficiencies in the management information systems. The internal audit must be conducted through independent and competent internal arrangements such as internal audit and\/or compliance functions, or through equivalent independent and competent third parties. The frequency of such internal audits shall be commensurate to the size, nature, and complexity of the Insurer and its investment activities. 6.9. The effectiveness of control will be assessed based on whether the Insurer has ensured: 6.9.1. adherence to its Investment Policy; 6.9.2. adequacy of internal audit arrangements relative to the investment activities of the Insurer, where applicable; and 6.9.3. adequate documentation of all investments including the use of pricing and valuation methodologies as well as timely reports on investment activities. Restrictions\/Prohibitions 6.10. Unless otherwise approved by the Authority, an Insurer is prohibited from the following activities: 6.10.1 pledging assets for collateral for any purpose other than securing insurance, and or regulatory obligations. Permitted Derivative Activities 6.11. An Insurer will only be permitted to invest in derivatives for hedging and\/or efficient portfolio risk management purposes and not for speculation purposes, unless otherwise approved by the Authority taking into consideration, inter alia, the primary authorised business activity of the Insurer, surplus assets held by the Insurer, type of exposure, and the risks associated with such speculative activity. 6.12. An Insurer must satisfy the Authority that it has the capacity to recognise, measure and prudently manage the risks associated with derivative use. 6.13. An Insurer must set out clear objectives and rationale in its Investment Policy, for the use of derivatives and must also be able to demonstrate to the Authority the intended hedging characteristics and the ongoing effectiveness of the derivative transactions or combinations of transactions through cash flow testing or other appropriate analyses. Cayman Islands Monetary Authority Page 10 of 11 6.14. Investments in derivatives shall only be conducted having regard to the Insurer\u2019s overall asset-liability management strategy.\", \"element\": \"section\", \"heading\": null}, {\"eId\": \"sec_7\", \"num\": \"7.\", \"text\": \"Disclosure 7.1. An Insurer must deal with the Authority in an open and co-operative way and must disclose to the Authority appropriately, anything relating to the investments by the Insurer of which the Authority would reasonably expect notice. This may include but not limited to appropriate and prompt disclosure to the Authority of any discovered material breach(es) to the approved investment policy and investment strategy, and\/or any significant realised\/unrealised losses that have or are likely to have material impact on the financial condition and position of the Insurer.\", \"element\": \"section\", \"heading\": null}, {\"eId\": \"sec_8\", \"num\": \"8.\", \"text\": \"Discretion of Authority 8.1. The Authority in assessing compliance with these Rules, may from time to time, use its discretion to waive the application of a Rule\/s to an Insurer, including the duration for which such a waiver would apply; subject to the Authority being satisfied that the waiver: 8.1.1. is in the public interest, 8.1.2. does not prejudice the interests of policyholders and 8.1.3. is necessary and\/or appropriate having regard to all the circumstances.\", \"element\": \"section\", \"heading\": null}, {\"eId\": \"sec_9\", \"num\": \"9.\", \"text\": \"Enforcement 9.1. Where there is a breach of these Rules, the Authority\u2019s policies and procedures as contained in its Enforcement Manual will apply, in addition to any other powers provided in the Insurance Act and the Monetary Authority Act and Regulations and any other applicable legislation as amended. 10. Effective Date 10.1. This Rule will come into effect within twelve months from the date that it is published in the Gazette. 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.................................................................................................................................................. 4\n1.\nIntroduction .................................................................................................................................................. 5\n2.\nStatement of Objectives ........................................................................................................................ 5\n3.\nStatutory Authority ................................................................................................................................... 5\n4.\nScope of Application ................................................................................................................................. 5\n5.\nDefinitions ...................................................................................................................................................... 5\n6.\nRules .................................................................................................................................................................. 6\n7.\nDisclosure ..................................................................................................................................................... 10\n8.\nDiscretion of Authority ......................................................................................................................... 10\n9.\nEnforcement ................................................................................................................................................ 10\n10.\nEffective Date ......................................................................................................................................... 10\n\nRULE \u2013 Investment Activities of Insurers\n\nCayman Islands Monetary Authority\n\nPage 4 of 11\nList of Acronyms\n\n[PIC] [Portfolio Insurance Companies]\n\nCayman Islands Monetary Authority\n\nPage 5 of 11\n\nRule on Investment Activities of Insurers\n\n1.\nIntroduction\n\n1.1.\nThis document establishes the Cayman Islands Monetary Authority\u2019s (the\n\u201cAuthority\u201d or \u201cCIMA\u201d) Rule on Investment Activities of Insurers (\u201cthe Rule\u201d).\nThe Rule should be read in conjunction with the following:\n\na)\nStatement of Guidance on Investment Activities of Insurers;\nb)\nInsurance Act, (as amended);\nc)\nInsurance (Capital and Solvency) (Class A Insurers) Regulations, 2012;\nd)\nInsurance (Capital and Solvency) (Class B, C and D Insurers)\nRegulations (2018 Revision);\ne)\nRule on Risk Management for Insurers;\nf)\nStatement of Guidance: Outsourcing Regulated Entities;\ng)\nall relevant insurance regulations; and\nh)\nany other relevant laws and regulatory instruments issued by the\nAuthority from time to time.\n\n2.\nStatement of Objectives\n\n2.1.\nTo set out regulatory investment requirements for Insurers that consider\nsolvency and all relevant risks.\n\n3.\nStatutory Authority\n\n3.1.\nThe measure is consistent with the Authority\u2019s statutory objectives as\nprescribed in the Monetary Authority Act (2020 Revision) (as amended)\n(\u201cMAA\u201d) at Section 34(1)(a) which states that:\n\n\u201cAfter private sector consultation and consultation with the Minister charged\nwith responsibility for Financial Services, the Authority may \u2013\n(a) issue or amend rules or statements of principle or guidance concerning the\nconduct of licensees and their officers and employees, and any other persons\nto whom and to the extent that the regulatory laws may apply.\u201d\n\n4.\nScope of Application\n\n4.1.\nThis Rule applies to all Insurers and registered Portfolio Insurance Companies\nsupervised by the Authority in accordance with the Insurance Act, (as\namended).\n\n5.\nDefinitions\n\n5.1.\nThe following definitions are provided for the purpose of this Rule:\n\n5.1.1. \u201cInsurer\u201d has the meaning assigned in section 2 of the Insurance Act\nand includes PICs for the purpose of these Rules.\n\n5.1.2. \u201cInvestment Policy\u201d means documented criteria, processes, and\nprocedures for implementing an Insurer\u2019s investment strategy.\n\nRULE \u2013 Investment Activities of Insurers\n\nCayman Islands Monetary Authority\n\nPage 6 of 11\n5.1.3. \u201cPortfolio Insurance Companies\u201d (PICs) has the meaning assigned\nunder Part 4A of the Insurance Act.\n\n5.1.4. \u201cRelated Business\u201d has the meaning assigned in section 2 of the\nInsurance Act.\n\n5.1.5. \u201cRisk Management Framework\u201d refers to the totality of the systems,\nstructures, policies and people that identify, assess, mitigate and\nmonitor all internal and external sources of risk that could have a\nmaterial impact on the Insurer.\n\n5.1.6. \u201cRegulatory Laws\u201d refer to Acts delineated in section 2 of the\nMonetary Authority Act (as amended).\n\n6.\nRules\n\nGeneral Principles\n\n6.1.\nAn Insurer must invest its assets in accordance with the following\nrequirements:\n\n6.1.1 only invest in assets and instruments, the risks of which it can properly\nidentify, measure, monitor, manage, control and report (including risks\nrelevant to market, credit, liquidity, concentration and strategic risks as\nwell as operational risk) and appropriately take into account in the\nassessment of its overall solvency needs.\n6.1.2 assets must be sufficiently secure. The security of an investment is\nrelated to the protection of its value and to the preservation of its\neconomic substance both individually and for the entire portfolio.\n6.1.3 ensure that assets remain available for payments to policyholders as\nthey fall due, along with other obligations of the Insurer.\n6.1.4 ensure that assets are held in a location which does not contravene the\nsanction orders observed in the Cayman Islands.\n6.1.5 unless otherwise required by legislation or regulations, and\/or where the\nAuthority has determined that the assets held are of low risk, the Insurer\nmust ensure that assets are sufficiently diversified (within and between\nrisk categories considering the nature of liabilities) subject to the nature,\nscale and complexity of the business and that all asset and counterparty\nexposures are kept to prudent levels.\n\nNature of Liabilities\n\n6.2.\nAn Insurer is required to invest in a manner that is appropriate to the nature\nand duration of its liabilities. In doing so, the Insurer must:\n\n6.2.1. have regard to the extent to which the cash flows from investments\nmatch the liability cash flows in terms of timing, amount and currency,\nand how these change in varying conditions.\n6.2.2. review and ensure that the investment guarantees, and embedded\noptions contained in its policies are suitable.\n6.2.3. ensure that assets held to cover its technical provisions and\/or capital\nto cover mismatching risks are invested in a manner appropriate to the\nnature and duration of the Insurer\u2019s insurance and reinsurance\n\nRULE \u2013 Investment Activities of Insurers\n\nCayman Islands Monetary Authority\n\nPage 7 of 11\nliabilities and in the best interests of all policyholders, taking into\naccount any disclosed policy objectives.\n6.2.4. Manage conflicts of interests (e.g. between the Insurer\u2019s corporate\nobjectives and disclosed insurance policy objectives) to ensure assets\nare invested appropriately.\n6.2.5. Ensure the close matching of assets and liabilities for unit-linked or\nuniversal life policies where there is a direct link between policyholders\nbenefits and investment funds or indices.\n6.2.6. If part of an insurance group, hold investments tailored to the\ncharacteristics of the liabilities and needs of the insurance legal entity\nand not be subject to undue influence from the wider objectives of the\ngroup.\n\nManagement of Investment Risks\n\n6.3.\nAn Insurer shall only invest in assets with risks it can properly assess, monitor\nand mitigate. The Insurer must:\n\n6.3.1. establish and maintain a risk management framework that is\nappropriate to the nature, scale and complexity of the business and its\nproposed investment activities.\n6.3.2. ensure that assets are appropriately segregated where required by the\nlegislation or regulations, or as otherwise directed by the Authority.\n6.3.3. ensure its investments, including those in collective investment funds,\nare sufficiently transparent and limit its investments to those where the\nassociated risks of the asset can be properly managed by the Insurer\nwith regard to the Insurer\u2019s overall risk tolerance and asset class\ndiversification strategy.\n6.3.4. have access to, and utilise, the requisite knowledge and skills to assess\nand manage the risks of its investments. Where an external investment\nadvisor or investment manager is used, the Insurer, retains ultimate\nresponsibility for all investments.\n6.3.5. understand all the risks involved sufficiently well (including determining\nhow material the risk from a proposed investment is) before any\ninvestments are undertaken. Assessments of risks must consider the\nmaximum possible loss.\n6.3.6. look through the structure of the investments to the underlying assets,\nconsider the risk characteristics of the underlying assets and how this\naffects the risk characteristics of the investments itself.\n6.3.7. if part of an insurance group, must ensure appropriate assessment and\nmanagement of investments and risks involved with due regard to the\nneeds of individual entities in addition to the group.  There must be\nprovision for sufficient liquidity, transferability of assets and fungibility\nof capital within the group.\n\nInvestment Policy\n\n6.4.\nAn Insurer must establish an Investment Policy that is appropriate to the\nnature, scale and complexity of the business, which must be submitted to the\nAuthority for approval. Unless otherwise approved by the Authority, the\nInvestment Policy must include the following information:\n\n6.4.1.\nspecify the nature, role and extent of its investment activities;\n6.4.2.\nspecify how it complies with rules 6.1- 6.3;\n\nRULE \u2013 Investment Activities of Insurers\n\nCayman Islands Monetary Authority\n\nPage 8 of 11\n6.4.3.\nset out appropriate standards (including process and procedures) for\nthe evaluation of all investment assets;\n6.4.4.\nidentify the Insurer\u2019s risk appetite and tolerance levels and types\nand characteristics of the investments;\n6.4.5.\ndescribe the Insurer\u2019s investment selection criteria, standards and\nother parameters including the asset allocation mix across\ninvestment categories;\n6.4.6.\nidentify\/prescribe minimum and maximum limits on asset allocation\nby geographical areas, markets, sectors, counterparties, currency\nand credit quality;\n6.4.7.\naddress monitoring and control of investments, accountability for all\ninvestment transactions and investment authorization criteria and\nlimits;\n6.4.8.\nwhere the Authority has agreed to the use of financial derivatives\nand other structured products, the Insurer\u2019s strategy must be limited\nto the scope the Authority has agreed to;\n6.4.9.\nidentify\nprocesses\nrelating\nto\nintra-group\nmanagement\nof\ninvestment activities;\n6.4.10.\nsave for B(i) and B(ii) Insurers, identify the in-house individuals, or\noutsourced investment managers, who are tasked with managing\nthe investments;\n6.4.11.\nwhere an external investment advisor or investment manager is\nused, provide profile of the said manager criteria used for selection\nand engagement.; and\n6.4.12.\nsave for Class B(i) and B(ii) Insurers establish an Investment\nCommittee to be responsible for:\n\n6.4.12.1. maintaining the investment policy;\n6.4.12.2. assessing on an annual basis (or other frequency as\ndetermined by the Authority) the suitability of the\ninvestment policy having regard to, among other things,\nchanges in the market; and\n6.4.12.3. overseeing the investment activities of the Insurer,\nensuring that the risk management functions continue to\nbe appropriate.\nIn doing so, the committee must ensure good governance,\ntransparency, and prevention of conflicts of interest concerning the\nInsurer\u2019s investment transactions and that the Insurer\u2019s operation\nsystems, personnel and information supporting the Insurer\u2019s\ninvestments is adequate.\n\nLoans\n\n6.5.\nInsurers are required to seek the approval of the Authority to provide loans or\notherwise extend credit for investment purposes in accordance with the\nInsurer\u2019s Investment Policy.\n\n6.6.\nA request for approval to the Authority must include material details regarding\nthe loan including, the purpose, terms and conditions of the loan. Depending\non the nature of the loan and the parties involved, the Authority may require a\ndraft loan agreement to be provided. The request should provide an explanation\nof the risk assessment conducted by the Insurer on the borrower and details\nas to whether collateral is required to support the loan.\n\nRULE \u2013 Investment Activities of Insurers\n\nCayman Islands Monetary Authority\n\nPage 9 of 11\nInternal Controls & Audit\n\n6.7.\nAn Insurer must have in place adequate systems of internal controls to ensure:\n\n6.7.1. the conduct of investments activities is appropriately supervised having\nregard to the Insurer\u2019s size, complexity, and the nature of its investment\nactivities; and\n6.7.2. that assets are managed in accordance with the overall Investment\nPolicy.\n\n6.8.\nSave for Class B(i) and B(ii) Insurers, an Insurer shall conduct an internal audit\nof its investment activities which ensures timely identification of internal control\nweaknesses and deficiencies in the management information systems. The\ninternal audit must be conducted through independent and competent internal\narrangements such as internal audit and\/or compliance functions, or through\nequivalent independent and competent third parties. The frequency of such\ninternal audits shall be commensurate to the size, nature, and complexity of\nthe Insurer and its investment activities.\n\n6.9.\nThe effectiveness of control will be assessed based on whether the Insurer has\nensured:\n\n6.9.1. adherence to its Investment Policy;\n6.9.2. adequacy of internal audit arrangements relative to the investment\nactivities of the Insurer, where applicable; and\n6.9.3. adequate documentation of all investments including the use of pricing\nand valuation methodologies as well as timely reports on investment\nactivities.\n\nRestrictions\/Prohibitions\n\n6.10. Unless otherwise approved by the Authority, an Insurer is prohibited from the\nfollowing activities:\n\n6.10.1 pledging assets for collateral for any purpose other than securing\ninsurance, and or regulatory obligations.\n\nPermitted Derivative Activities\n\n6.11. An Insurer will only be permitted to invest in derivatives for hedging and\/or\nefficient portfolio risk management purposes and not for speculation purposes,\nunless otherwise approved by the Authority taking into consideration, inter alia,\nthe primary authorised business activity of the Insurer, surplus assets held by\nthe Insurer, type of exposure, and the risks associated with such speculative\nactivity.\n\n6.12. An Insurer must satisfy the Authority that it has the capacity to recognise,\nmeasure and prudently manage the risks associated with derivative use.\n\n6.13. An Insurer must set out clear objectives and rationale in its Investment Policy,\nfor the use of derivatives and must also be able to demonstrate to the Authority\nthe intended hedging characteristics and the ongoing effectiveness of the\nderivative transactions or combinations of transactions through cash flow\ntesting or other appropriate analyses.\n\nRULE \u2013 Investment Activities of Insurers\n\nCayman Islands Monetary Authority\n\nPage 10 of 11\n6.14. Investments in derivatives shall only be conducted having regard to the\nInsurer\u2019s overall asset-liability management strategy.\n\n7.\nDisclosure\n\n7.1.\nAn Insurer must deal with the Authority in an open and co-operative way and\nmust disclose to the Authority appropriately, anything relating to the\ninvestments by the Insurer of which the Authority would reasonably expect\nnotice. This may include but not limited to appropriate and prompt disclosure\nto the Authority of any discovered material breach(es) to the approved\ninvestment\npolicy\nand\ninvestment\nstrategy,\nand\/or\nany\nsignificant\nrealised\/unrealised losses that have or are likely to have material impact on\nthe financial condition and position of the Insurer.\n\n8.\nDiscretion of Authority\n\n8.1.\nThe Authority in assessing compliance with these Rules, may from time to time,\nuse its discretion to waive the application of a Rule\/s to an Insurer, including\nthe duration for which such a waiver would apply; subject to the Authority being\nsatisfied that the waiver:\n8.1.1. is in the public interest,\n8.1.2. does not prejudice the interests of policyholders and\n8.1.3. is necessary and\/or appropriate having regard to all the circumstances.\n\n9.\nEnforcement\n\n9.1.\nWhere there is a breach of these Rules, the Authority\u2019s policies and procedures\nas contained in its Enforcement Manual will apply, in addition to any other\npowers provided in the Insurance Act and the Monetary Authority Act and\nRegulations and any other applicable legislation as amended.\n\n10.\nEffective Date\n\n10.1. This Rule will come into effect within twelve months from the date that it is\npublished in the Gazette.\n\nCayman Islands Monetary Authority\n\nPage 11 of 11","akn_extracted_at":"2026-06-22 15:40:05.051332+00","cms_id":"2022-0059","law_type":"subordinate","year":"2022","number":"59","title":"Rule \u2013 Investment Activities of Insurers","status":"in_force"},"provenance":{"files":[{"file_id":"5174","expr_id":"279","kind":"akn_xml","filename":"2022-0059_SL 59 of 2022.akn.xml","source_url":null,"storage_path":"\/Users\/q\/kyleg-data\/working\/SUBORDINATE\/2022\/2022-0059\/2022-0059_SL 59 of 2022.akn.xml","content_md5":"2a05eb807ae8f387777e516dcf3869ea","byte_size":"18962","http_last_modified":null,"fetched_at":"2026-06-22 15:40:05.152186+00"},{"file_id":"557","expr_id":"279","kind":"pristine_pdf","filename":"2022-0059_SL 59 of 2022.pdf","source_url":"\/cms\/images\/LEGISLATION\/SUBORDINATE\/2022\/2022-0059\/2022-0059_SL 59 of 2022.pdf","storage_path":"\/Users\/q\/kyleg-data\/pristine\/SUBORDINATE\/2022\/2022-0059\/2022-0059_SL 59 of 2022.pdf","content_md5":"d208bb52e3af15e4b43c3909fc88c97e","byte_size":"503112","http_last_modified":null,"fetched_at":"2026-06-21 23:09:36.315698+00"},{"file_id":"558","expr_id":"279","kind":"working_pdf","filename":"2022-0059_SL 59 of 2022.pdf","source_url":"\/cms\/images\/LEGISLATION\/SUBORDINATE\/2022\/2022-0059\/2022-0059_SL 59 of 2022.pdf","storage_path":"\/Users\/q\/kyleg-data\/working\/SUBORDINATE\/2022\/2022-0059\/2022-0059_SL 59 of 2022.pdf","content_md5":"d208bb52e3af15e4b43c3909fc88c97e","byte_size":"503112","http_last_modified":null,"fetched_at":"2026-06-21 23:09:36.315698+00"}],"paragraph_count":70,"latest_history":null},"quality":{"expr_id":"279","doc_id":"279","quality_state":"needs_review","quality_score":"85","needs_human_review":"t","deterministic_categories":"{page_header_footer_noise}","llm_categories":"{truncated_text,other}","repair_actions":"{manual_review,reextract_full_text,strip_page_furniture}","finding_severity_counts":"{\"low\": 1, \"medium\": 1}","finding_summary":"Sample appears mostly complete but shows signs of truncation near the end; human review recommended to ensure full text integrity.","assessed_at":"2026-06-22 15:29:46.091604+00","updated_at":"2026-06-22 15:29:46.091604+00"}}