Why Cayman Captiv(e)ates
Appleby captive experts Jacob MacAdam and Menelik Miller discuss what makes Cayman such a ‘captive-ating’ jurisdiction and how Appleby can help clients establish and grow their presence in the jurisdiction.
Captive Review (CR): What makes the Cayman Islands a leading jurisdiction for insurance and reinsurance business?
Appleby (A): The Cayman Islands is recognised as one of the world’s largest and most well-regarded international financial centres, home to over 70% of the world’s hedge funds as well as many captive insurance companies. Cayman’s position as a leading jurisdiction is supported by its focus on international clients, with more than 90% of captive insurance business originating from the United States. The Cayman Islands’ decision not to pursue equivalency with Solvency II, a European regulatory directive, as well as its tax neutrality, both provide a level-playing fi eld and lower operational costs for insurers and reinsurers domiciled in Cayman.
CR: How does the Cayman Islands’ location and infrastructure contribute to its attractiveness for insurance and reinsurance companies?
A: The proximity of the Cayman Islands to the United States, combined with its natural beauty and healthy work-life balance, makes it a popular destination for international business relocation. The infrastructure in Grand Cayman offers a conducive environment for insurance business. In addition, the Cayman Islands has a mature financial infrastructure with a plethora of specialised accountants, lawyers and insurance professionals that makes doing business there easy.
CR: What recent developments have been seen in the Cayman’s captive industry?
A: In 2023, the Cayman Islands Monetary Authority (CIMA) continued to issue licences to new captive insurance companies and portfolio insurance companies. This growth indicates the continued strength of the jurisdiction’s insurance industry, with a total of 653 captive insurance companies, including 154 segregated portfolio companies, now licensed in Cayman. The business development pipelines are considered healthy, with expectations of growth and new entrants in the sector.
CR: How is the reinsurance sector performing in the Cayman Islands?
A: The reinsurance sector in the Cayman Islands is thriving. Events like the annual New York breakfast briefing at the Harvard Club and the Cayman Finance Reinsurance Roundtable have highlighted the sector’s robust performance. Despite challenges such as the need for insurers to increase rates to cover the increased cost of reinsurance, the successful registration of reinsurance firms in the Cayman Islands is contributing to the industry’s growth. This growth is mainly in the life and annuity fields. The confidence in the jurisdiction continues to grow with the presence of such entities as Northern Re, Talcott Re and RBC Re being established.
CR: What role does the government play in the growth of the Cayman Islands’ insurance industry?
A: The government of the Cayman Islands, the financial services regulator (CIMA) and industry bodies all play a crucial role in the development of the sector. The partnership between the government, regulator and industry stakeholders is a key factor in ensuring the sector’s successful growth. This collaboration is evident in events, initiatives and a collaborative approach to introducing new laws and regulations which all result in the Cayman Islands continuing to be a robust, dynamic, well-regulated and progressive financial services jurisdiction. These insights reflect the dynamic and evolving nature of the Cayman Islands’ international captive, insurance and reinsurance industry, highlighting its strategic positioning, regulatory environment, growth trends and the government’s role in fostering industry development.
CR: How can Appleby help?
A: Our multi-disciplinary (re)insurance team is composed of market leading experts in their sectors. We advise on all aspects of (re)insurance law and regulation and are attuned to and often involved in shaping the latest regulatory developments within the sector. Our team have substantial experience in establishing new entities and successfully leading (re) insurers through the CIMA licensing process as well as assisting with ongoing legal and regulatory obligations. We regularly act as Cayman’s counsel on market leading M&A transactions involving Cayman (re) insurers and provide pragmatic advice on structuring, restructuring and financing (re)insurance vehicles.
First published by Cayman Captive Review 2023.
