The future is looking bright for Cayman’s captive insurance sector, with 2019 delivering another year of solid growth in terms of premiums written and assets held. The Island is also diversifying into new areas of the insurance industry, boosted by its decision not to pursue Solvency II equivalence, says Adrian Lynch of the Insurance Managers Association of Cayman.
This year is best described as bullish, in terms of the growth seen across all aspects of Cayman’s insurance and reinsurance industries.
The healthcare captive industry continues to be drawn to Cayman. Although the statistics may reflect a levelling out of growth subsequent to the consolidation that has occurred over the past few years, those same statistics show very solid growth in terms of premiums written and assets held. At 33 percent of our licence base, Cayman’s healthcare captives have now written $5.8 billion in premiums year to date.
Conditions in the reinsurance space are perfect for Cayman to emerge as a real alternative to Bermuda.
Workers’ compensation follows closely behind at $4 billion, with 19 percent of our licence base. That again emphasises the materiality of Cayman’s contribution in the alterative risk space. When you combine property and Gl as the next two major lines written, they too equal 20 percent, and upwards of $4 billion each in premium writing.
Considering the current pricing discipline (can I say hardening yet?) a bump of 7 to 10 percent in those same written numbers looks like a reasonable expectation for 2020.
Although life reinsurance accounts for less than 4 percent of Cayman’s licence stats, it accounts for almost $3 billion of premiums written. Taken in conjunction with the growth of class B(iii)s in 2017, 2018 and 2019, I firmly believe that the conditions in the reinsurance space are perfect for Cayman to emerge as a real alternative to Bermuda.
The number of new B(iii)s issued in 2019 (up to Q3) is 13; new B(iii)s issued in 2018 were 14. Statistics on the number, type and risk location of Cayman’s captives are shown in Tables 1, 2 and 3.
Another huge talking point in Cayman has been the issue of Solvency II equivalence. While other jurisdictions have claimed that Cayman will inevitability pursue Solvency II equivalence, I can categorically state it will not. With over 92 percent of our insurance and reinsurance business coming from the US market, we remain as aligned to the US market as we have always been.
When you consider the impact that Solvency II has on governance, risk, compliance and capital requirements, it makes perfect sense for Cayman to position itself as a less onerous jurisdiction for companies that don’t have the same needs as those operating under the European regulatory framework.
Anything such as Solvency II that strengthens the architecture of the jurisdiction is to be lauded and encouraged. But when the pendulum swings past the point that the impact starts being felt commercially, in my opinion it is time for the mechanism to be tweaked.
Cayman has built a reputation on proportionality and balance. That will continue—and will be reflected in the growth of longevity reinsurers in Cayman. As an industry, the managers need to be cognisant of this. It is frustrating that some of our peers have not embraced this new theme. We must evolve as a jurisdiction, an effort that must include all of us, including managers and service providers.
Finally, there must be an honorary mention of one shining light in our jurisdiction: group captives. These account for 20 percent of our base, at 121 licensees and upwards of $3 billion in premiums written in 2020, which looks set to keep growing.
With an economy in surplus and a talent pool that includes expatriates and 25,000 plus Caymanian locals, the prospects for growth in Cayman look exciting indeed.
Adrian Lynch is managing director of Aon Cayman and marketing committee chair at Insurance Managers Association of Cayman. He can be contacted at: firstname.lastname@example.org
IMAC, Adrian Lynch