Confidence pays off in captive insurance
The captive insurance market has seen dynamic changes in recent years, with captives emerging as a catalyst for innovation and growth, according to Julianne Reid (pictured left) and Matthew Haymes (pictured right) of RSM Cayman.
The Cayman Islands has experienced significant growth in its captive insurance sector. According to Julianne Reid, a senior manager in assurance at RSM, the market’s expansion since 2020 is notable, with 29 new licences issued through the third quarter of 2024. This growth outpaced cancellations, signalling strong interest and confidence in the jurisdiction.
“There’s a lot of excitement around the Cayman captive and reinsurance markets with sizable projected growth over the coming years,” Reid remarked. The surge in new captives naturally increases the demand for audits, and shifts in operations for existing captives add complexity.
Inflationary pressures have prompted captive managers to seek cost reductions which, in turn, force service providers to enhance efficiency within their own operations.
“Some cryptocurrency and digital asset companies have turned to captive structures for coverage.” Julianne Reid
Technology transforms the captive landscape
One of the most transformative forces in the captive insurance industry is the rise of data analytics, automation, and artificial intelligence (AI). As Matthew Haymes, a director in RSM’s North American actuarial consulting practice, based in Cayman, pointed out, these technologies are reshaping processes and enabling captives to deliver value to captive organisations.
“Multiple clients in the last few years on the consulting side have looked to utilise the claims data collected through their captive structure to benefit the larger organisation,” Haymes noted. This trend aligns with broader goals, such as enhancing customer relationships, streamlining operations, and reducing future claims.
For example, one group captive experiencing rapid growth engaged RSM to implement a fully automated system for financial processing. This system extends from collecting and analysing claims data to generating financial statements and client reports, straight through to dividend reporting. By eliminating manual processes, captives can achieve significant cost savings and gain new strategic insights for better business planning.
Similarly, in the medical malpractice sector, another captive has utilised data analytics tools to better understand its claims data. Text recognition software helped it to identify common causes of claims, enabling these organisations to address high-risk areas proactively.
By integrating these insights into training programmes, the organisations aim to reduce the frequency and severity of future claims.
AI’s expanding role
The potential of AI in the captive sector extends well beyond claims management. Captives can leverage AI to improve processes including control procedures, detecting potential errors, and allowing for corrections before clients are impacted. By embedding such technologies into their processes, organisations can improve risk management, enhance efficiency, and strengthen customer relationships.
“This can all happen before the clients are impacted,” said Haymes, emphasising how AI-driven tools can transform operational frameworks. The claims data enabling these innovations is often collected and managed within the captive structure—offering a competitive edge that traditional insurance mechanisms cannot match.
An appealing domicile
The Cayman Islands has long been recognised as a premier domicile for captives, thanks to its robust infrastructure and regulatory environment. Reid highlighted the availability of captive managers, auditors, actuaries, and legal experts within Cayman. This concentration of expertise reduces organisational risk and simplifies the process of establishing and operating captives.
“The availability of these professionals reduces risks to the organisation, and their concentrated location makes establishing a captive quick and straightforward,” Reid explained. This efficiency extends to scaling operations and managing turnover, ensuring that companies can adapt smoothly to changes.
Another key factor is Cayman’s globally recognised regulatory framework. The Cayman Islands Monetary Authority (CIMA) has maintained a reputation for consistency, transparency, and policyholder protection, making the jurisdiction particularly attractive to insurers and reinsurers. Cayman’s tax-neutral status sets it apart from competing markets, reinforcing its appeal as a domicile for captives and reinsurers.
The rise of reinsurersransform operational frameworks.” Matthew Haymes
The rise of reinsurers
The reinsurance sector in Cayman is experiencing significant growth, particularly with the influx of large life and annuity reinsurers. Haymes attributed this trend to the success of established reinsurers and Cayman’s favourable regulatory environment, which provides flexibility in capital and operational structures.
“CIMA and Cayman have adopted a business-centred approach,” Haymes noted. This approach allows entities to align their operations with their unique risk profiles and choose from different globally recognised accounting standards which best align to their organisation and objectives.
Industry groups such as the Insurance Managers Association of Cayman and the Cayman International Reinsurance Companies Association also play a pivotal role in promoting Cayman’s insurance market and facilitating growth.
Future focus areas
As 2025 approaches, RSM is positioning itself to support the continued evolution of the captive and reinsurance markets. One key area of focus is the reinsurance market’s potential expansion. Cayman is increasingly seen as a viable secondary domicile for reinsurers, bolstered by its favourable regulatory environment and strong infrastructure.
Another promising development is the emergence of captives tailored to new risks and industries. Reid pointed out that some cryptocurrency and digital asset companies have turned to captives for coverage. These innovative structures offer protection to entities that might otherwise struggle to secure insurance, highlighting the captive structures’ potential to lead in emerging markets.
Haymes emphasised the role of AI in the future of captives. From feasibility studies to ongoing process management, AI is expected to drive efficiencies and enhance decision-making across the board. Regulatory changes, such as CIMA’s efforts to achieve US regulatory equivalence with the National Association of Insurance Commissioners, are poised to further enhance Cayman’s competitiveness.
Challenges and opportunities
Despite the promising trends, the sector faces challenges including economic uncertainties and evolving regulatory landscapes. Inflation has begun to moderate, leading to softening insurance markets in some areas. However, geopolitical factors, such as potential tariffs in North America, could offset these trends and impact captive growth.
Climate-related risks—such as hurricanes and wildfires—continue to pose significant challenges. As Haymes noted, captives may play a vital role in addressing these risks by offering tailored solutions that traditional insurers are unwilling to provide.
The Cayman Islands is cementing its position as a global leader in the captive insurance and reinsurance sectors. With a robust regulatory framework, a highly skilled workforce, and a commitment to innovation, Cayman offers a compelling value proposition for insurers and reinsurers alike. As technology continues to advance and new risks emerge, the opportunities for captives to deliver value will only grow. Underpinned by these factors, the future of Cayman’s insurance market looks exceptionally bright.
Julianne Reid is a senior manager in assurance based in the George Town, Grand Cayman office of RSM. She can be contacted at: julianne.reid@rsm.ky
Matthew Haymes is a director in RSM’s North American actuarial consulting practice, based in Cayman. He can be contacted at: matthew.haymes@rsm.ky
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