Cayman Islands: At A Glance: Insurance

The Cayman Islands is home to over 700 captive insurance companies. The word 'captive' refers to the relationship between the insurance company and its owner. Most owners have little to do with insurance but have found that it's far more cost-effective to insure with their own insurance company than with somebody else's. If there are no claims they keep the profit. There are many other important advantages that captives offer, but they will not be covered at this time.

You may be interested to know just how important this modest and unpretentious captive industry is to the Cayman Islands. According to the Cayman Islands Monetary Authority's (CIMA) statistics as at 30 June 2016, IMAC's clients generated annual insurance premiums of US$13.6 billion and had assets under management of US$58billion.

These are enormous figures especially for an industry that employs fewer than 300 people in Cayman. The Cayman Islands remains the second-largest captive domicile in the world after Bermuda.

To be more specific, of these 709 insurance companies 90% come from North America. Medical malpractice liability is the single largest line of business underwritten representing 33% of the companies and contributing 22% of the annual premium.

Workers compensation, general liability and property represent a further 42% of the companies, and although there are only twenty six life assurance companies, these contribute 28% of the total premiums. The type of risk these insurance companies underwrite is important as it determines the skills that the insurance managers need to employ.

Cayman's reputation as a global insurance centre is primarily based on the quality and experience of the local insurance managers and the professionalism of the insurance regulator, CIMA.

As with many other financial services based in Cayman such as banks and funds, although huge amounts of funds are channelled through the jurisdiction, only a relatively small amount 'sticks' in Cayman. IMAC's own studies have calculated that its contribution to the local Cayman economy, measured by gross domestic product, is approximately US$85million per year, i.e. the captive insurance industry contributes $85million to Cayman's economy every year.

This amount is broken down into three main categories: government fees (insurance licence & registry office), $11million; service fees to insurance managers, lawyers, accountants etc, $62million; transport, hotels, restaurants and leisure, $12million. This is understandable when you consider constant flow of the 700 insurance company owners visiting the Cayman Islands to hold board of director meetings and to meet with the insurance department at CIMA.

In addition to helping Cayman's general economy, IMAC has a number of specific charitable projects. One of these is the IMAC Education and Scholarship Foundation which was started in 1994. Since then it has raised US$2.9million which has been used to fund thirty eight young Caymanians attending university overseas. T

The university courses are not limited to financial based subjects, but cover anything ranging from tourism to medicine.

All in all, the captive insurance industry is a very important component of the economy and the success of the Cayman Islands.

Produced with kind assistance from the Insurance Managers Association of Cayman (IMAC).

Source: Cayman Islands Monetary Authority (CIMA) / Updated as at 30 June 2016

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.

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