It has been said that the greatest leader is one who “knows the way, goes the way, and shows the way” – and Cayman is no exception in captive insurance. With over 40 years’ experience under its belt in captive formation, operation, and regulation, this jurisdiction has proven that it is more than capable of being the world’s leading captive insurance domicile.
It is no surprise then, why leading financial institutions, Fortune 500 companies, and private and public businesses from across the globe continue to choose Cayman.
Captives: a history
So where did it all start?
To answer that, we need to travel back in time to the 1970s; a tumultuous decade of political movement, economic upheaval – and the insurance availability crisis.
For years, liability insurance payouts in the US had risen alarmingly so; tenfold in some cases. In 1976 a breaking point was reached. Several major insurers withdrew, leaving physicians inadequately covered and threatening to strike.
Concerned over the coverage of its physicians, Harvard Medical Institutions decided to take matters in its own hands, and formed the offshore captive insurance company, Controlled Risk Insurance Company Ltd (CRICO).
Harvard’s first instinct was to approach Bermuda, since the institution had a healthy appreciation of the domicile’s captive management. Feelings were not mutual however, as Bermuda turned down CRICO, causing the insurer to turn elsewhere; straight into the welcoming, open arms of the Cayman Islands.
Word spread. The sentiment, ‘if it’s good enough for Harvard, then it’s good enough for us’ caused more and more organisations to quickly follow suit. Cayman was officially the new domicile in captive insurance.
Three years later, Cayman introduced its own captive legislation. Soon after, Reiss Organization set up a group captive for captive owners in the domicile. By 1987, Cayman had risen to become the 2nd largest domicile in the industry.
The rest, as they say, is history.
Clearly better business
Cayman’s business-friendly environment is teeming with opportunity. Thanks to its highly developed professional services industry, there is a wealth of skilled lawyers, auditors, actuaries, and investment service providers.
Naturally, this industry attracts a global client base of major international companies – all of the ‘Big 4’ accounting institutions are present, and 40 of the world’s top 50 banks hold licenses here.
Like any other industry, captive insurance requires a combination of intelligent and innovative guidance. Cayman understands this, and takes the view that appropriate regulation and international cooperation are the key drivers of commercial success, rather than an impediment to it.
The jurisdiction boasts a sound regulatory model which caters to sophisticated institutional or high net worth investors. The model recognises that fund managers trading in the EU or US on behalf of a Cayman fund will be subject to local regulation in the jurisdiction of investment. Therefore, local legislation demands strict adherence to international standards; taking a tough stance against tax evasion, corruption, and money-laundering.
The regulator, Cayman Islands Monetary Authority (CIMA), ensures it remains one step ahead of the game by keeping up with emerging risks and other developments in the global insurance sector. It is a member of the International Organisation Securities Commission (IOSCO), which grants full regulator-to-regulator transparency. CIMA has also adopted and applied Basel Core Principles for banking, IAIS principles for insurance, IOSCO principles for securities and investments, and OECD principles for corporate governance.
As far as transparency goes, Cayman has historically gone above and beyond the call of duty in its mission to combat global financial crime. In 1998, the jurisdiction was amongst the first in the world to criminalise money-laundering on all serious crimes by virtue of the Proceeds of Crime Law.
In 2000, Cayman cooperatively followed a request by the Financial Action Task Force (FATF) to retroactively apply Know Your Client (KYC) provisions on all of its financial industry clients. This process was costly and time consuming, and met with protest by other jurisdictions. After severe backlash from the US and the UK, the FATF had no choice but to abandon its requirement, leaving Cayman as one of the few jurisdictions to actually complete the due diligence.
Cayman then took initiative to outpace international standards by making AML/CFT procedures mandatory for all licensees, registrants, and entities conducting financial business in the jurisdiction; including corporate service providers and trust companies.
And although Cayman is not part of the EU, in 2005 it agreed to cooperate with the EU Savings Directive – a fully informative and proactive tax information exchange agreement with 27 of the EU’s member states.
The list goes on:
- Cayman has provided the US Department of Justice full authority to obtain records on accounts since 1990
- It has earned itself a place on the white list of the Organisation for Economic Cooperation and Development (OECD) in 2009
For over 30 years, this round-the-clock effort between government, regulator, and industry has ensured that any communication between overseas governments and international authorities is always open and cooperative.
Connected to the world
With direct links to New York, London, Miami, Toronto, and other major global cities, Cayman is a gateway to the rest of the world. Nearly 30 insurance managers are based here, and manage captives from all the world’s continents.
Its central time location (GMT-5) is also ideal for those operating businesses from Asia, Europe, and the Americas.
Politically and economically stable
As a British overseas territory, Cayman maintains close links to its mother country’s strong political and legal systems. Parliament is democratically elected, a judicial system is in place, and the Grand Court is based on English common law principles.
The economy continues to grow, and Cayman boasts one of the highest living standards in the world. Last year, the government recorded a budget surplus equal to 3.4% of the country’s GDP. In its April 2017 Country Risk Report, AM Best assessed Cayman on its political, economic, and financial system risk; all of which were rated “low”.
Quantity and quality
Cayman really is unbeatable. Not only does it take the number one spot for best credit rating across the Caribbean, but it is also the only domicile to maintain its impressive Aa3 rating since 1997 – even during the global financial crisis of 2007/2008.
IMAC chair, Linda Haddleton says it best: “Quality over quantity. This is the hallmark of the Islands insurance industry; influencing success.”
Don’t just take our work for it. Let our numbers speak for themselves:
- Ranked 1st in best Caribbean domicile credit rating (Moody’s Rating Outlook 2017)
- Ranked 1st worldwide in healthcare captives (CIMA Insurance Statistics Overview, 2017)
- Ranked 2nd worldwide in captive insurance (CIMA Insurance Statistics Overview, 2017)
- 705 licensed captive insurance companies (CIMA Insurance Statistics Overview, 2017)
- 23 new licenses issued so far in 2017 (CIMA Insurance Statistics Overview, 2017)
- US $12.3 billion in premiums (CIMA Insurance Statistics Overview, 2017)
- US $61.6 billion in assets (CIMA Insurance Statistics Overview, 2017)
Cayman gets it
It is not by chance that Cayman has grown into a leading jurisdiction for captive insurance.
More than 40 years ago, this domicile approached the world of captive insurance with thoughtful innovation and hasn’t looked back since – proving that it knows the way, goes the way, and shows the way.
There is only more to come.