21 January 2021Cayman analysis

Captives keen to join Cayman’s new reinsurance association

A number of captives have expressed an interest in joining up with the Cayman International Reinsurance Companies Association (CIRCA), the new association has revealed.

Cayman’s reinsurance community announced it was forming a new industry group in late December 2020, to promote peer interaction, advocacy and education on topics impacting the regulatory and business environment.

CIRCA’s founding members include: Aureum Re, Barents Re, CIBC Cayman Reinsurance, Greenlight Re, Knighthead Annuity & Life Assurance Company, Nassau Re (Cayman) and United Insurance Company.

The group is keen to welcome other organisations involved in Cayman’s reinsurance business, however, including captives and legal and accountancy firms, a number of which have already made enquiries about joining.

Nathan Gemmiti, chief operating officer and general counsel at Knighthead Annuity & Life Assurance Company, and chairman of CIRCA, highlighted the reinsurance industry’s strong history in the Cayman Islands. He said the time had come to form an industry association representing its specific interests.

Reinsurance market participants had previously held informal gatherings to discuss proposed legislation, said Gemmiti. For example, as part of Cayman Finance’s annual outreach breakfast at the Harvard Club in New York City, a number of reinsurers participated in a very well attended roundtable on reinsurance in the Cayman Islands.

However, no formal vehicle existed that allowed the community to develop a shared industry position in response to things like proposed legislation.

The creation of CIRCA puts that situation right.

The need for an association like CIRCA has been steadily growing in recent years, said Gemmiti. “There has been considerable growth for reinsurance in Cayman in recent years, including entities moving from Bermuda or forming affiliate offices here,” he explained. “It felt like high time that we formed an industry group specifically for these businesses, to create a collective voice when speaking about regulation and advocating for the jurisdiction generally.”

This growth shows no signs of abating. Graham Mackay, chief operating officer at Nassau Re and vice chairman of CIRCA, said: “There is certainly one large public reinsurer already hiring in Cayman and there are a number of others looking at opening an office here.”

The Cayman Islands Monetary Authority (CIMA) has responded to this growth by expanding its team, bringing in people with global reinsurance expertise, said Gemmiti. This, in addition to Cayman’s strong existing infrastructure, has made CIMA very approachable and allows reinsurers to engage in substantive dialogue with the regulator.

“Many insurance companies and investment companies already have a relationship with Cayman and CIMA,” he said. “For example, there are approximately 650 captive insurers and 11,000 funds operating in Cayman.  Given their familiarity, it may be a smaller step for them to license a reinsurer here.”

Mackay added: “It is a great time to be in the Cayman Islands. Cayman’s reinsurance industry has experienced growth as market participants seek a highly rated domicile with an established regulatory framework, a sophisticated work force and a great place to live.”

Speaking with one voice

Cayman has an established and highly consultative process when it comes to developing the rules around its re/insurance industry, making it all the more important that institutions are organised to provide coherent feedback.

CIRCA joins a number of other “excellent industry groups in Cayman, such as Cayman Finance, IMAC (Insurance Managers Association of Cayman) and CII (Cayman International Insurance),” noted Gemmiti. “We wanted a standalone association to represent the specific interests of this community,” he said.

“All of CIRCA’s members are also members of other industry groups in Cayman, so there will be considerable overlap and synergies between the groups,” Gemmiti said. “We believe having more active industry groups is better for the entire business environment.”

Mackay added: “Having an association that is exclusively focused on serving the interests of the reinsurance community gives it a voice in what is being communicated by the industry back to regulators and legislators on matters affecting our members.”

In many cases captives will share the same interests. “Off-shore reinsurers can be standalone entities operating as part of a larger international group,” explained Gemmiti. “A domestic insurer may already have a Cayman captive insurer that wants to amend its business plan and do third party reinsurance business, for example.”

Gemmiti points to the experience of Bermuda International Long Term Insurers and Reinsurers (BILTIR) as an example of how CIRCA can serve its members and grow. “BILTIR is a relatively young organisation and the growth it has enjoyed shows our growth potential,” he said.

There is also the natural tendency to see Cayman and Bermuda as rivals, both being islands off the east coast of the US and major global re/insurance hubs, but CIRCA is keen to downplay that idea.

“We don’t see this as Cayman versus Bermuda,” said Gemmiti. Different re/insurers will have different priorities, and the two islands have different offerings.

Cayman has proved a popular alternative to Bermuda for reinsurers looking for a base that operates outside of the Solvency II regime, for example.

“The Bermuda regulator has adopted Solvency II equivalence, and although that may be attractive for many, it may not be ideal for others,” said Mackay. “That has been one factor in Cayman’s growth in this area, but it is not the only one. Cayman is a very global domicile, even if its reinsurance business does have a US focus.”

“We just want insurers to know what Cayman has to offer,” Gemmiti concluded.