14 December 2016Cayman analysis

Formations of new captives continue apace

For all the challenges and growing competition facing the captives sector for Cayman, 2016 was a very successful year for the sector with the number of new formations already vastly exceeding 2015 figures by the third quarter—the latest available when this publication went to press.

The Cayman Islands captive management industry had seen 33 new captive formations in the nine months to September 30, significantly ahead of the 22 new formations in the full 12 months of 2015 and the 24 new captive formations in the whole of 2014.

This figure of 33 included 10 new formations for the three-month period between July 1 and September 30.

To put these figures in context, the total number of licensees domiciled in the Cayman Islands was 711 as at September 30, 2016. Of these 361 were pure captives and a further 146 segregated portfolio companies.

Total premiums written for the sector were $13.9 billion in the period, with total assets held of $59 billion.

It appears that increasing competition from more than 80 captive domiciles worldwide as well as the enduring soft market has required innovation, persistence and ingenuity on behalf of the industry to continue to attract new captives.

Kieran O’Mahony, chairman of the Insurance Managers Association of Cayman (IMAC), said the figures make him confident about Cayman’s continued leading position in the captive market.

“We are not a quantity-driven domicile; rather, for us in Cayman, quality is key."

“The acceleration in the number of new captive formations over recent years is evidence of the continued strength of our industry and the attractiveness of Cayman as the captive domicile of choice,” O’Mahony says.

“I especially wish to praise the outstanding efforts of the Cayman Islands insurance managers’ fraternity as well as the many ‘friends of Cayman’, drawn from all over the globe, who actively seek out the cream of new business opportunities for the Cayman Islands and help to successfully bring those opportunities to captive fruition.

“What is even more remarkable is the fact that our segregated portfolio companies, (SPCs and PICs) and our group captives, for which we are also the leading domicile, are seeing steady organic growth (as well as new incorporations) and both of these models tend to suppress new captive formation numbers.

“We are not a quantity-driven domicile; rather, for us in Cayman, quality is key. Being able to combine both of those elements, in the face of difficult market trading conditions, is especially satisfying.”

The new statistics also showed that the Cayman Islands remains a leading jurisdiction for medical professional liability captives, with 34 percent of its registered captives in this category.

Workers’ compensation was the second largest sector with approximately 21 percent of captives assuming this risk.

The research also showed that Cayman captives are increasingly being used for more innovative purposes, such as employee medical stop loss, equipment maintenance, and unrelated party risks.