Mike Gibbs outlines exactly why Cayman is such an attractive destination for finance and dispels some of the myths propagated by the international press.
Despite the ongoing international lobbying, education and public relations initiatives of the Cayman islands government, Cayman Finance, the insurance managers Association and various others, the Cayman islands continues to face the challenges of being labelled by the uninformed, by Hollywood films and by the misconceptions of some global journalists, with the stigma of being a ‘haven for tax evaders’ or a ‘contributor to the global economic meltdown’. When you consider the following, nothing could be further from reality:
• The all-crimes anti-money laundering legislation of the Cayman Islands has been evaluated by the international monetary Fund and by the Financial Action task Force as being one of the very best in the world
• The Cayman Islands has full income tax transparency with the United States, proactive tax reporting with 27 members of the european Union and full tax information exchange Agreements with 20 countries around the world, well exceeding the number required by the Organisation for economic Cooperation and Development. As a result, the Cayman islands is an OeCD ‘white-listed’ jurisdiction
• As a member of the International Organization of Securities Commissions (IOSCO), the Cayman islands has full ‘regulator-to-regulator’ disclosure with all iOSCO regulators
• The Cayman Islands Monetary Authority (CIMA) has formalised procedures with the four main US banking regulators for the exchange of supervisory information relating to banks and banking institutions that operate in both territories
• Over the past two decades, the Cayman Islands has complied with every international initiative on transparency. As a result, it is a stable, transparent, tax-neutral jurisdiction with a secure, British legal system that is used by global financial institutions to access international capital markets.
A classic example of such misrepresentation was the recent UK Channel 4 Dispatches documentary How the rich beat the taxman, which, to quote Anthony Travers, OBE, chairman of Cayman Finance, “plumbed new depths in cliché-ridden journalism and the recycling of hoary old myths”. Travers continued: “Cayman attracts business because it has relevant and attractive laws, a high standard of professional service, an effective court system with ultimate appeal to the Privy Council and full IOSCO transparency. Additionally, Cayman has been, and remains, highly attractive as a tax-transparent, but tax-neutral jurisdiction, in which relevant structuring can be undertaken to pool funds invested from the international capital markets. So, despite being depicted as draining countries’ economies, trillions flowed into the US and the UK through Cayman Islands funds, providing a vital lift to the respective economies during the global meltdown.” As further evidence of its global standing, the Cayman Islands jurisdiction is regularly recognised for its expertise and level of international business value-added, with a recent example of this being The Banker publication, which placed Cayman first in the category of specialised financial centres in its 2010 IFC ratings. Not only was this a repeat of its 2009 ranking, but the jurisdiction increased its winning margin over its competitors, with this result highlighting the value offered to institutions seeking to expand their overseas operations.
"Cayman is home to 729 captives writing more than $7.5 billion in annual premium and having total assets in excess of $42 billion."
This result comes at a time when statistics from the Cayman Islands Monetary Authority (CIM A) note that the jurisdiction maintains $1.8 trillion in deposits and interbank bookings, is the world’s largest domicile for hedge funds and catastrophe bond transactions, is the second-largest domicile for captive insurance and maintains a vibrant stock exchange. It is also the preferred shipping registry for the world’s mega-yachts. To enable and support such levels of business, CIM A provides a very proactive and client-focused regulatory environment that meets all international standards, thereby facilitating the widening of investment opportunities and the legitimate international movement of funds. As a result, the Cayman Islands offers a veritable one-stop shop for all your financial services needs, while remaining flexible and nimble enough to react to new products and initiatives.
The above success is no better evidenced than in the area of captive insurance, where Cayman is the second-largest overall captive domicile behind Bermuda, the leading domicile for healthcare-related captive business and home to the majority of the world’s top alternative risk facilities or group captives. At the end of September 2010, Cayman was home to 729 captives writing more than $7.5 billion in annual premium and having total assets in excess of $42 billion.
The continued success of the Cayman Islands as a captive domicile is fuelled by the unique partnership of a sound and businessfocused regulatory regime, combined with the unwavering support of the Cayman Islands government and the Insurance Managers Association of Cayman (IM AC) in the promotion and protection of Cayman’s reputation as the domicile of choice for captive insurance. This only goes to show what can be done when a domicile truly works together towards a common goal. A prime example of this partnership is IMAC’s annual Cayman Captive Forum, which attracts more than 800 delegates each December and features a wide range of speakers and educational presentations on all aspects of the captive and insurance industry. Additionally, the new Insurance Law should also further facilitate the desirability of Cayman as a reinsurance domicile.
When companies first look into captives, it is normally due to a negative experience, e.g. a lack of availability or reduction in coverage, and/or premium increases. As a result, there is an overriding desire to ‘take control’ of their insurance destiny and to insulate themselves from the fluctuating cycles of the traditional insurance market. This can be achieved by establishing their own captive insurance vehicle or by joining an existing one. Either way, a captive can offer many benefits, including such aspects as coverage and programme design flexibility, insulation from market fluctuations, control of costs, improved cash flow, an improved negotiating position, an enhanced safety and claims management ‘culture’ throughout the organisation, flexibility with investment opportunities and the retention of investment returns.
Mike Gibbs is the president of Kensington Management Group. He can be contacted at: 345 814 7000 or at: email@example.com