Keeping Cayman competitive

The Cayman Islands has long been established as an important global financial services centre helping to ensure the flow of the global economy and providing professional services to many aspects of the industry such as fund management, the formation of private and commercial trusts and for captive and international insurance.

Since 1979 when the Insurance Law was passed in the Cayman Islands, the jurisdiction has become a major centre for international insurance business. Today, it is the second largest domicile for captives and remains the dominant jurisdiction worldwide for healthcare captives with the highest number of licensed healthcare captives globally.

The Cayman Islands captive insurance industry is composed mainly of insurance risk emanating from North America. The next most important geographical source is the Caribbean and Latin America, collectively. This insurance industry is quite varied, with prominent risk types including healthcare, workers’ compensation, property and general liability.

The international sector

The Cayman Islands insurance sector remains highly competitive with steady growth projected to continue throughout 2018 and 2019. A total of 33 new insurer licences were issued for the year ended 2017 and 21 new insurer licensees have been issued for the first nine months of 2018. The total number of licensed insurance entities relating to the international insurance sector was approximately 700 companies at September 30, 2018.

As the regulator of the world’s largest healthcare captives jurisdiction, the Cayman Islands Monetary Authority (CIMA) has recognised that the globalisation of insurance markets evolves at a rapid pace.

The US Affordable Care Act 2010 resulted in consolidation in the US healthcare industry which has meant that captive insurance programmes have been impacted and adapted as the healthcare systems merge.

Although this consolidation has resulted in a reduction in the number of healthcare captives in the Cayman Islands, the captives surviving the merger activity are generally better diversified and have stronger capital positions due to advantages from economies of scale. The jurisdiction has continued to see formation of new healthcare captives, which is an indication of a settling US healthcare industry and Cayman’s continuing leading position in this segment.

In general, captive insurance structures are being put to more sophisticated use by their owners. Therefore, CIMA strives to ensure that Cayman Islands’ insurance sector is regulated in accordance with international best practices, while having consideration for the competitiveness and required innovation to remain as one of the top leading domiciles.

A formal framework

On August 4, 2018, CIMA signed a memorandum of understanding (MoU) with the National Association of Insurance Commissioners (NAIC).

The signing took place during the International Insurance Relations (G) Committee 2018 NAIC Summer meeting in Boston, Massachusetts. As a formal framework for mutual assistance, and to facilitate the exchange of information, the MoU is designed to help insurance supervisors in the US and Cayman Islands in better understanding and coordinating compliance with applicable laws, regulations, rules and requirements.

It also provides technical assistance to maintain efficient, fair, safe and stable insurance markets for the benefit and protection of policyholders in each jurisdiction.

As a result of this agreement, CIMA welcomes the opportunity for further engagement with other jurisdictions, with a view to execute additional bilateral MoUs for the betterment of the insurance sector.

New specialist joins the division

Reinsurance specialist Peter Fox has been appointed to the Insurance Supervision Division, effective June 8, 2018. Fox’s position further strengthens the existing senior management team for the Insurance Supervision Division of Ruwan Jayasekera (head of division); Suzanne Sadlier (deputy head); and Razaak Busari (deputy head).

Fox’s career spans nearly 46 years in the insurance industry. Before joining CIMA, he served as senior manager with KPMG in its UK office from 2008 to 2011. During his time there, he provided extensive audit and consulting advice to Lloyd’s and London Market companies. This included a blend of mergers and acquisitions, Solvency II and asbestos/health hazard/pollution claim advice to clients.

He was designated as the principal point of contact for UK originating captive consulting activities. He also served as the lead mentor for newly qualified actuaries and was the national lead in the actuarial graduate recruitment programme. Additionally, he was elected by KPMG’s Financial Services group to represent views to the UK board of KPMG.

In 2012, Fox joined American International
Group to work as a global pricing actuary where he took on a special project to harmonise worldwide pricing in the enterprise segment of the business. From 2013 to 2017, he worked with International General Insurance where he held the positions of group chief actuary and group chief officer. Other previous employers include Aon Insurance Brokers, Riverstone Management, the UK Actuarial Profession and Legal & General Assurance Society.

Looking ahead

Insurtech is dominating the trends in emerging risks being covered by international insurance companies with a particular focus on cyber risk, blockchain technologies and data analytics. As key stakeholders in the emergence of these technologies and the associated impact on re/insurance companies, many international regulatory authorities are undertaking reviews of their regulatory frameworks as appropriate to be in a position to identify the risks and challenges posed by insurtech—as well as the potential benefits.

CIMA has received several insurtech-related enquiries from existing and potential licensees and is continuing research and monitoring developments closely to ensure it is positioned to regulate the evolving landscape as appropriate.

The Authority is seeing an increase in reinsurance companies establishing in the Cayman Islands, predominantly to provide coverage of life and annuity products but also for property and casualty risks. In addition, several global mid-tier reinsurance companies have re-domiciled to the Cayman Islands from established reinsurance jurisdictions and CIMA expects that this trend will continue.

The Authority continues to regularly participate in international regulatory and risk conferences to ensure it is well positioned to be at the forefront of emerging regulatory standards, to engage with the captive and international insurance industry, and to collaborate with other stakeholders to identify areas where greater efficiency, flexibility and innovation are necessary while maintaining a robust regulatory framework.

Given this robust, yet flexible and competitive, regulatory regime, its infrastructure and high levels of expertise and experience, the Cayman Islands will maintain its position as a leading world-class jurisdiction for offshore insurance.

Cindy Scotland is managing director of the Cayman Islands Monetary Authority. For more information visit www.cimoney.com.ky