IMAC’s new chairman profiles the Cayman Islands’ continuing success as a captive domicile and provides an annual update on progress made by the industry.
Strength in adversity In the introduction to the 2009 Cayman Captive, it was noted that ‘strength is measured in adversity’ and this comment was made in reference to the longevity of the captive industry as a whole. If we use the same yardstick for 2010, the Cayman Islands’ captive industry continues to stand out as a strong domicile in the international sea of uncertain times.
I believe that it is our more than 30 years of experience, expertise and effective regulation that has helped us maintain our strength. After all, with age, comes wisdom. And it is our spirit of co-operation within our industry that fuels this strength as we endeavour to move our industry forward. A quote from Henry Ford seems to say it best: “If everyone is moving forward together, then success takes care of itself.”
2010 was an active year for our industry, with a number of new developments that will claim the attention of the sector in the days ahead. One such development was the passage of the insurance Law 2010 after extensive consultation with the insurance industry. the Law is slated to become effective in 2011. Changes to the Law were influenced by five dynamics, namely: the recommendations from the 2009 international monetary Fund review, a focus on domestic market regulation, international co-operation, protection of the captive market and the need for the development of a strategy for the reinsurance market. the mandate for the new insurance Law was to create two new classes of insurer, create three new sub-classes of Class B and increase enforcement powers. the two new classes of insurer are to separately license special purpose vehicles and reinsurers. the sub-classes of Class B will lead to the issuance of Class B (i), Class B (ii) and Class B (iii) captive insurance licences. the type of licence granted will be determined by the amount of third-party business written by the captive. the mandate for the insurance Regulations was to develop prescriptive capital and solvency requirements for third-party insurers and update the reporting forms. therefore, from 2011, solvency requirements will differ based on the class of licence held. the regulations are now being drafted and will be available for consultation later on this year.
And in the vein of industry consultation, in may 2010, the premier of the Cayman islands, in conjunction with the Cayman islands monetary Authority (CimA) and the insurance managers Association of Cayman (imAC), invited key industry representatives to attend an insurance Symposium to discuss current and future industry developments. A number of recommendations were drafted from these discussions and a Working Group formed to determine the way forward. this working group consists of myself, as the chairman of imAC; Ron Sulisz, chair of imAC’s R&D Committee; Cindy Scotland and Gordon Rowell of CimA; Bart Hedges of Greenlight Re; and Dax Basdeo and Samuel Rose of the Cayman islands government.
Continuing on the theme of moving forward, subsequent to the September AGm, imAC created a new Committee—the Research and Development Committee—the chair of which sits on the imAC executive board. this committee was established to recommend to the executive Committee appropriate items of research of domicile comparison and the development of new and innovative Cayman islands legislative or regulatory items.
Maintaining Cayman’s leadership position
The changes to the insurance Law and amendments to industry oversight will help the Cayman islands to maintain its position as a leading captive domicile with up-to-date, relevant legislation and sensible regulation. indeed, among the international captive domiciles, the Cayman islands had the most formations in 2010. the largest market segment of all captive licensees remains the healthcare industry, which makes up 45 percent of licensees. Cayman captives have stable net premiums and the expense-to-loss ratio remains low at an average of 10 percent. As of September 30, 2010, there were 729 captives writing $7.5 billion in premiums. you will notice that there has been a decrease in the overall numbers since the prior year and this is simply due to the spring-cleaning of old inactive captives, mainly older cat bond special purpose vehicles. this is also as a result of the new head of insurance, who has in his first year taken advantage of soft market conditions and actively pursued licensees in run-off to finalise their process and surrender their licences. And of course, new formations are moving ahead with 18 new licences issued this year and another 11 that have been approved in principal as of early October.
In addition, Cayman continues to participate in international initiatives through CimA. CimA has been involved in both the international Association of insurance Supervisors (IAIS) and the Overseas Group of Insurance Supervisors (OGIS). Cayman is a founding member of IAIS and through 2009-2010, CIMA has been very involved in IAIS through inclusion on its market Conduct Subcommittee, pension Reform Subcommittee and ComFrame task Force, as well as being a lead validator on international memorandums of Understanding. the Cayman islands is also chair of the OGIS’s education Subcommittee. through OGIS, Cayman participated in discussions held by the Committee of European insurance and Occupational Pensions Supervisors (CEIOPS) on the issue of Solvency II.
Unfortunately, we are still subject to unwarranted negative press about our jurisdiction, mostly as a result of misinformation. The facts are that the Cayman islands is not a bank secrecy jurisdiction; it is fully transparent. the Cayman islands has a comprehensive All Crimes Anti money Laundering treaty (1990) and a tax information exchange Agreement ‘TIEA’ (2001) with the United States, as well as subsequent TIEAS with countries within the EU that provide full transparency and prevent tax evasion. these treaties are more stringent than domestic US law. Cayman has worked with the international monetary Fund, Organisation for economic Cooperation and Development, Financial Action task Force and others to create a stable and well-regulated legal financial system.
Indeed, in late September, there was a meeting in Singapore of the OECD Global Forum on transparency and exchange of information, during which Cayman Islands’ compliance with international standards was recognised. the Cayman islands was one of eight countries—and among the first in the world—to be assessed under the Global Forum’s Peer Review programme. the reports of the assessed countries were approved at the peer Review Group meeting held in July in the Bahamas and were eventually adopted at the Singapore meeting. the Cayman islands is a member of the Global Forum, as well as a member of the Steering Group and peer Review Group. the Cayman islands peer Review Report identified, “…a well developed legal and regulatory framework”. The report also identified areas that could benefit from some improvements. the assessors also reported that “in respect of access to information, the competent authority of the Cayman islands is invested with broad powers to gather relevant information”.
All of these factors will assist the Cayman islands captive industry as we confidently move forward as the domicile of choice for the captive industry.
Monique Jackson is the chairman of IMAC. She can be contacted at: email@example.com