A delegation from the Cayman Islands led by Alden McLaughlin, Minister, Internal Financial Services Policy, is attending the 2006 Risk and Insurance Management Society (RIMS) conference in Honolulu this week.
The conference, the largest of its kind with more than 10,000 participants, covers issues related to risk management, as well as strategic, business, financial and operational risk.
‘With more than 35 members, our delegation’s exhibition under the Cayman Islands Financial Services banner will provide an ideal forum for various industry representatives from Cayman to interact with current and potential clients,’ said Mr. McLaughlin. ‘We will also be hosting a special Cayman Islands-themed reception for RIMS participants to showcase our leadership position in the captive insurance industry and to provide valuable networking opportunities for us and our service providers.’
Cayman is now recognized as the leading domicile for companies seeking to establish a captive, which is a formal self-insurance company that provides actuarial risk coverage and maximum profit retention. Due to its close connection to the parent company, coverage by a captive is tailored to meet the specific needs of policyholders. Premiums are based on the loss experience of the captive.
With more than 730 captive insurance companies registered here, the Cayman Islands is the world’s second largest captive insurance domicile, primarily serving the health care sector.
The Cayman Islands is growing as a centre of expertise in segregated portfolio companies which allow a number of smaller self-insurers to assemble under a core captive but whose assets and liabilities are legally segregated from each other.
At a media briefing held Tuesday afternoon, Mr. McLaughlin, Seamus Tinan, Chairman of the Insurance Managers’ Association of Cayman, Mary Lou Gallegos, Head of Insurance Supervision for the Cayman Island Monetary Authority as well as Raeann Shepherd, Director Risk-Finance, Trinity Health, and Tom Oliphant, Senior Insurance Manager, Americas and Captives, Solvay American discussed the growing Cayman Islands captive insurance industry.
Introduced through legislation to the Cayman Islands in the early 1980s, ‘Captive insurance, once considered an ‘alternative market’ within the insurance sector, now represents over 50 per cent of it,’ said Mr. Tivnan.
Mr. Oliphant explained that captives were the answer to his pharmaceutical company’s insurance needs. Benefits include:
• A reduction in premiums paid to external insurers, and the concurrent internal retention and utilization of captive premiums;
• Premium stability;
• Broader, more stable coverage terms (allowing for coverage for specific difficult exposures);
• Flexibility in coverage length (resulting in more ease in addressing longer term risks);
• More operational response regarding safety as plant management becomes aware that, through the captive, Solvay is paying a significant percentage of any loss;
• And, the ability to address future coverage issues through options other than the commercial insurance market.
Ms Shepherd of Trinity Health, the United States’ fourth largest Catholic health system, discussed the specific benefits of establishing their captives in the Cayman Islands. Aside from the broad terms and conditions and the better than market rate premiums, she emphasised the regular and personal relationship with CIMA allowing for early discussions on strategic initiatives.
‘This face-to-face interaction let us achieve something very important to an organization like ours serving the underserved and poor. Every $5,000 saved in premiums results in allowing another person access to health care, which advances the Trinity Health mission.’
With projected steady growth of the industry in the Cayman Islands, Mr. Tivnan says Cayman may become the number one SPC domicile within seven years.
‘We have a first-rate financial services industry and excellent business infrastructure based on the partnership among government, the regulator, the international community, and the service providers and practitioners within the financial industry,’ observed Mr. McLaughlin. ‘The leading-edge captive insurance industry is an excellent example of how this infrastructure works for business benefit.’
The RIMS 2006 conference began Sunday and wraps up today.