Captive Insurers Flock To Cayman Islands
The number of captive insurance companies formed in the Cayman Islands increased markedly during 2011, a trend that is expected to continue into 2012, according to Cindy Scotland, the Managing Director of the Cayman Islands' Monetary Authority.
While conditions in the international marketplace have been challenging to the formation of captives over the past several years, there continues to be solid interest in the Cayman Islands that translated into a 52% increase in captive formations in this jurisdiction in 2011,” said Scotland.
CIMA ended 2011 with 739 captives and 632 segregated portfolios registered in the Caymans. Further, the Cayman Islands continued to be the leading jurisdiction for healthcare captives. This was the primary line of business for 256 companies (35% of the total). Workers’ compensation remained the second largest line of business with 161 companies (22%) providing this as their primary type of risk insured. The 739 active captives as at December 31, 2011, comprise the following: 419 pure captives (57%), 124 segregated portfolio companies (17%), 75 group captives (10%), 52 association captives (7%), 36 special purpose vehicles (5%), 32 open market insurers (4%) and one rent-a-captive.
Scotland said that already in the early weeks of 2012 CIMA's Insurance Division has processed five new captive license applications, with a further four applications in the initial stage of processing at the beginning of February.
CIMA noted that, globally, the captive market has been soft. Among the factors that have placed a downward pressure on captive formation across jurisdictions since the credit crisis have been the generally low investment returns for all types of investments and fears of another recession, coupled with the availability of commercial insurance at very low rates.
Gordon Rowell, Head of Insurance at CIMA, commented: “In some cases this has dampened corporate sponsors’ motivation to take on the expense of setting up a captive in order to self-insure. Nevertheless, industry players know the value of captives as a major part of organisations’ risk management strategy. The industry has established a track record for robust risk management and in recent years captives and insurance managers have been quite efficient at maximising value despite the soft market.”
Concluding Scotland said: “Given these factors, captive sponsors are seeking the greatest efficiencies and the choice of domicile for a captive becomes critical in achieving this value. The Cayman Islands has fared well because of a number of advantages. Captive participants have told us that in addition to the expertise of local service providers who have built up specialization, especially in the area of health care captive structuring, the jurisdiction is very cost competitive, the process for establishment of the captive is efficient, and the legislative and regulatory framework is stable and robust.”