Kevin Poole, the General Manager of the Insurance Managers Association of Cayman, talks about what
makes the Cayman Islands such an attractive location for domiciling a captive insurance company
The Cayman Islands is one of the world’s major financial centers and has a thriving, large, and diverse financial services sector. Recognized as a top international banking center, the world’s leading domicile for alternative investment funds, the second largest captive domicile, and a world leader in structured finance, the jurisdiction stands as the only offshore international financial center to possess such breadth and depth in financial services. While achieving its commercial success, the Cayman Islands continues to attract business to its shores with its professional infrastructure, business-friendly approach, flexibility, an English common law framework, stability, a well-regulated regime, and tax neutrality.
World-class professional services and stable government
The Cayman Islands has a depth of expertise of insurance managers, auditors, lawyers, bankers, tax advisors, and other service providers who, for over 50 years, have specialized in providing insurance, auditing, financial, legal, and corporate administration services to captive insurance companies and start-up international, commercial re/insurance companies. Cayman has institutional knowledge across all disciplines that are required for a successful captive.
The Cayman Islands is a British Overseas Territory and has a history of stable government, committed to promoting the financial services industry. The importance to the economy can’t be underestimated as the industry drives the Cayman economy. The financial services sector is the largest contributor to domestic economic activity and directly accounted for 40.2% of GDP in 2019, which is expected to have increased since, while financial services account for close to 20% of all employment.
Standing and compliance culture
The Cayman Islands has long been committed to implementing best international practices and is in step with the anti-money laundering and anti-terrorist financing requirements of the Organisation of Economic Cooperation and Development (OECD) and Financial Action Task Force (FATF). More recently, the FATF has advised that the Cayman Islands has fully implemented the action plan agreed with the global standard setter for anti-money laundering, meaning the Cayman Islands is now eligible to be delisted at the next FATF plenary in this month, which comes after it successfully completed the routine follow-up onsite visit in September.
The overall success of the Cayman Islands has been confirmed by the international credit rating agency Moody’s, which in June 2023 confirmed Cayman has maintained its government Aa3 bond issuer rating, Aaa country ceiling rating, and ‘stable’ economic outlook. Moody’s referenced the Cayman Islands’ stable political environment, strong policy continuity, high government effectiveness, sound financial management, and economic growth following the Covid-19 pandemic as factors supporting the Aa3 rating.
As one of only four jurisdictions outside of the G20 to hold a position in the top 25 Global Financial Centres in the world, and taking into account the above factors, the Cayman Islands is a truly attractive place to do business.
Growing in numbers
When it comes to captive insurance, Cayman continues to grow. At the end of Q2 2023, Cayman had a total of 675 licensed international insurance companies, writing premium of $22.51 billion with assets of $71.24 billion. So far in 2023, Cayman has licensed 16 new captives, four portfolio insurance companies plus one Class D commercial reinsurer. Growth is being seen from various industries including transportation, financial, and healthcare, along with new group captives. Local insurance managers agree that interest in Cayman captives, both direct and reinsurance, remains very strong as business development pipelines for the industry remain healthy. Over the last few years, Cayman has experienced growth in new captive formations. In 2022, there were 33 new formations, while in 2020 and 2021 there were 36 and 37, respectively. Based on projections for 2023, this success is expected to continue. Despite the continued competition from onshore domiciles, the lure of Cayman remains strong.
Sensible and proportionate regulation
The Cayman Islands regulatory landscape continues to develop, while The Cayman Islands Monetary Authority (CIMA), in its efforts to fulfill its regulatory and supervisory mandate, is represented in various global bodies that include the following:
- Caribbean Financial Action Task Force
- Group of International Finance Centre Supervisors
- Working Group on Cross Border Banking
- The Caribbean Group of Banking Supervisors
- Association of Supervisors of Banks of the Americas
- Group of International Insurance Centre Supervisors
- International Association of Insurance Supervisors
- Offshore Group of Collective Investment Scheme Supervisors
- International Organisation of Securities Commissions.
This level of participation is important to ensure the Cayman Islands is kept abreast of the developments affecting offshore centers and that the jurisdiction plays an active role in international regulatory developments and standards.
From an insurance perspective, the industry is guided by rules, statements of guidance, policies, and procedures that are set by CIMA in line with international regulatory standards. These cover areas such as licensing, business plan changes, outsourcing, market conduct, investment activities, corporate governance, internal controls, cybersecurity, risk management, reinsurance arrangements, succession planning, anti-money laundering/countering the financing of terrorism, and others, while insurance managers must also adhere to detailed responsibilities. While, to some, the extent of such guidance may seem excessive, it is the bedrock of Cayman’s desire to have an insurance industry beyond reproach and to aim high to satisfy international regulatory standards while adopting appropriate risk-based regulatory standards based on size and complexity. Such high standards should be a comfort to clients doing business in Cayman knowing they have captive experts at their designated insurance manager and local regulator working together to ensure the ongoing success of each and every client as well as the jurisdiction.
The Cayman Islands has always been a hotbed of innovation, as one of the first to recognize the potential of insurance-linked securities structures, cell companies, and more recently incorporated cells known as portfolio insurance companies. Now, Cayman is seeing expanded interest from commercial reinsurance entrants. These new reinsurers recognize the Cayman Islands is renowned for its expertise in capital market transactions, portfolio management, alternative investment strategies, and risk management, and an experienced and approachable regulator. This has fostered trust among reinsurers, cedants, and investors in the booming industry. What’s particularly attractive to newcomers is a streamlined work permit and licensing process, along with excellent infrastructure, schools, and a skilled local workforce. The islands’ natural beauty and high quality of life make them a desirable location for work and leisure. Having many flight options to major US hubs means business partners can visit easily.
CIMA regulates and supervises financial services, including reinsurance. With years of experience in captive insurance regulation, CIMA is renowned globally for its high level of reinsurance expertise. The Cayman Islands government has created a streamlined licensing process and an efficient regulatory framework for reinsurance companies, which means the Cayman Islands stands out from other successful reinsurance domiciles as it has not committed to aligning its regulatory regime with Solvency II. This is appealing to US carriers and non-EU reinsurance companies seeking a regulatory framework not defined by European market requirements. CIMA’s robust principles-based approach has been welcomed by reinsurance entrants and ceding carriers.
There are no direct taxes in the Cayman Islands. There is no income tax, company or corporation tax, inheritance tax, capital gains or gift tax.
For those interested in learning more about the Cayman Islands as a captive domicile, the Insurance Managers Association of Cayman (IMAC) encourages anyone to register for this year’s Cayman Captive Forum, which will be held at the Ritz-Carlton on 28-30 November. This event is the world’s largest gathering of captive owners and service providers and is renowned for its educational content, with an agenda covering the most relevant and groundbreaking topics in the industry, delivered by world-class experts with vast experience in the industry. Going forward, you can expect to see more Cayman representation at industry conferences. This will be kicked off by attendance at the American Society for Healthcare Risk Management conference being held in Minneapolis in October 2023, as IMAC will be partnering with Cayman Finance. This is expected to continue in 2024 with attendance at both the World Captive Forum and the Captive Insurance Companies Association conferences in the first quarter of 2024. The Cayman Islands remains the jurisdiction of choice for many for good reasons, combining a business environment with a top tourist destination that will not disappoint on any level.
Article from Captive Review