Since the early 1970s, the Cayman Islands have been blazing the
trail for the development of the captive insurance and the
alternative risk transfer industries. By providing robust yet
familiar corporate structures for captive insurance companies,
enacting progressive legislation and implementing risk-based
regulation, the Cayman Islands quickly became a leading domicile of
choice for captives as well as other corporate insurance products,
including insurance linked securities.
Cayman has continued to innovate, modernising its legislative
and regulatory infrastructure and responding to market demands in a
business-centric, yet appropriately governed environment. The most
recent legislative developments has been the implementation of the
Portfolio Insurance Companies (PIC) Regulations (2015), which
reinforce and enhance the insurance statutory framework by
providing greater flexibility and do so in a robust and efficient
manner. Instead of enacting a whole new swathe of legislation,
Cayman wisely chose to amend its long established and widely
understood Segregated Portfolio Company (SPC) legislation. This
gives to Cayman all the beneficial characteristics of Incorporated
Cell Company legislation but none of the potential uncertainty or
the law of unintended consequences, which can be associated with
enacting "new" legislation.
Cayman's regulatory model is noteworthy as it provides
regulation based both on the type of structures utilised as well as
the composition of the given risk profile. Transparency is
paramount, providing a perfect balance between heightened oversight
for companies with higher risk profiles and a more efficient
approach for those vehicles that are predominantly investment in
There are more than 5,000 captive insurance companies in the
world, up from roughtly 1,000 in 1980, according to the AM Best
Captive Centre. The Cayman Islands remains the second-largest
captive domicile in the world (Cayman, Bermuda and Vermont being
the most well-known) out of the more than 70 jurisdictions now
providing captive insurance domiciliation. Cayman has continued to
fare comfortably in this increasingly competitive marketplace
because of its long and successful history and its extensive level
of experience and expertise. The healthy, but arms-length
industry-to-regulator-to-legislators relationship fosters
innovation and timely implementation of leading-edge products that
answer market demand.
To be more specific, as at 31 March 2015, there were 760 Class
B, C and D insurance companies under supervision of the Cayman
Islands Monetary Authority with pure captives and SPCs representing
the lion's share of these, 414 and 139 respectively. Total
assets held were reported at US$54 billion and total premiums at
Healthcare captives are particularly prominent and Cayman has
been the leading jurisdiction for this sector of business since
Harvard Medical School selected Cayman over Bermuda as its domicile
of choice back in 1976. Thirtyfour percent of Cayman's captive
insurance companies are healthcare related and medical malpractice
liability is the largest line of business underwritten. That being
said, Cayman has developed other areas of business including
workers' compensation, life, professional and product
liability, property and a host of other categories, including some
that are non-traditional, such as environmental pollution, cyber
and terrorism risks.
The Insurance Managers Association of Cayman (IMAC), the
industry body with responsibility for promoting the
jurisdiction's captive insurance industry in its target
markets, is actively developing previously untapped markets,
including Canada and Latin America, where there are numerous
benefits for companies in these regions to use a Cayman-domiciled
captive insurance company, in addition to those traditionally used
by American companies.
Produced with kind assistance from the Insurance Managers
Association of Cayman (IMAC).
Originally published in Cayman Finance
Magazine, 2015-2016, Issue 2
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