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.
The Cayman Islands is well positioned to lead the development of the growing captive, insurance-linked securities and reinsurance industries and maintain its position as a reputable, responsible and world-class international re/insurance hub, says Cindy Scotland, managing director of the Cayman Islands Monetary Authority.
The days of attractive pricing in the professional liability and medical malpractice markets look to be over, at least for now, as the number and severity of claims climb ever higher. Sophisticated healthcare companies have responded by creating captives, giving them greater control over their cost of coverage, says Charles Kolodkin of the Cleveland Clinic.
The Cayman Islands has traditionally been synonymous with healthcare captives and single parent companies. The magnitude, and rapid growth, of its group captive insurance industry tends to be overlooked, say Erin Brosnihan from KMG, Donna Dreuth from Captive Resources, and Melanie Snyman from PwC.
Captives are excellent tools for enabling innovation aligned to the strategic, operational and financial objectives of their parents. Their ability to formalise governance controls, together with the flexibility of a ring-fenced retention and placement strategy, make these an important enabler for a company’s wider corporate strategy, say Elizabeth Carbonaro and Adrien Collovray of Willis Towers Watson.
Benchmarking makes data more digestible and gives them context, making it easier to understand their significance. The captive insurance industry is teeming with data points, and Aon has embraced benchmarking as a way to help captives maximise their value, says Aon’s Jimmy Hussey.
While the rise in verdict severity, and the knock-on effect that has on all settlements, represents a threat to MPL profitability on a per-claim basis, the rising frequency of “mega” batch claims is potentially even more devastating, as Richard Henderson of Trans Re explains.
The 2002 Terrorism Risk Insurance Act created a federal backstop for insurance claims related to acts of terrorism and a system of shared public and private compensation for insured losses resulting from acts of terrorism. Its possible expiry now threatens the availability of terrorism coverage, says John Talley of the Missouri Department of Insurance.
Cayman’s captive insurance and reinsurance markets are seeing exciting new trends, with new business lines creating value for existing and future stakeholders, say Aon’s Howard Byrne and Ghislain Ghyoot, and PwC’s Ricardo Agrella.
Much has been written about the growing regulatory overreach of state regulators and tax authorities with regard to their treatment of captive insurance companies over the past couple of years. But tax avoidance and mitigation strategies pale in importance to the many other benefits provided by captive insurers, says the Vermont Captive Insurance Association’s Richard Smith.