Minister for Financial Services, Wayne Panton outlines the reasons Cayman’s government is bullish about prospects for its captive sector.
The Cayman Islands’ captive insurance sector has been providing excellent products and services to its clients for more than three decades. Since licensing our first captive in the late 1970s, Cayman has grown to become the second largest captive insurance domicile in the world and the leading jurisdiction in the healthcare segment.
Our level of success is attributable to our sound legal and regulatory environment; and to our adherence to globally accepted standards.
Complementing these attributes is Cayman’s commitment to a consultative and collaborative approach to business that encourages ongoing, appropriate dialogue between government, the regulator, and industry participants. The lines of communication are open, so we are able to keep abreast of changes in the external environment, and make the necessary adjustments to remain dominant players in a highly competitive market.
As an example, recent legislative amendments that resulted in the differentiation between captives and open-market reinsurers were based on substantive discussions with the Insurance Managers Association of Cayman and other key industry stakeholders. Also, the jurisdiction’s regulator, the Cayman Islands Monetary Authority, seeks to have personal meetings with its licensees in order to gain a thorough understanding of the key issues the industry faces.
For clients, the clear result is Cayman’s ability to structure efficient and specialised solutions that meet their risk management needs.
For Cayman, the result is that our 2013 third-quarter results indicate growth: total insurance premiums are $13.8 billion, with total assets at $85.6 billion—a 17 percent increase in total premiums over the similar period last year.
The international market also looks promising for additional growth.
According to recent statements from AM Best, ‘the captive insurance industry remains stable and continues to outperform the commercial insurance industry in many key metrics’. Furthermore, reports from the US indicate that the Affordable Care Act is driving middle market companies to consider self-insured plans; we are aware that already some 35 states already have passed legislation to encourage captive formations.
Cayman continues to monitor the global regulatory landscape as well, including the potential impacts from Solvency II. However, I must note that the majority of Cayman’s insurance business is generated from North American-based captives, which principally reinsure the risk of a parent or related entities. As such, the regulatory model needs to be different from the one that Solvency II addresses.
Moving forward, we expect that our legislative and regulatory framework, adherence to globally accepted standards, and open communication among stakeholders will position us well to capitalise on the expected growth in captives. The Cayman Islands government congratulates our captive insurance sector on its tremendous success, and firmly stands behind it as a partner in its performance as the leading jurisdiction for captives.
Minister for Financial Services, Wayne Panton, CIMA