Premier McKeeva Bush announced immigration incentives and a targeted marketing campaign to attract reinsurers to the Cayman Islands during the Cayman Captive Forum last week.
Mr. Bush used the largest conference on Island and the largest captive insurance conference in the world with 1,200 delegates as the venue for a new strategy announcement aimed squarely at the reinsurance industry in Bermuda.
Mr. Bush said that while growth in the insurance arena has been strong, reinsurance activity has been limited.
“Anecdotal evidence from the industry suggests that as a jurisdiction Cayman has several advantages that we can capitalise on to attract greater interest from reinsurance companies,” Mr. Bush said.
In addition to the new Insurance Law (2010), which has given Cayman a framework to increase reinsurance activity in the region, Cayman also needed to offer a package of immigration incentives to facilitate the ease of entry by the specialised staff needed in this industry and a targeted marketing campaign that will educate and attract potential reinsurance business on the benefits of Cayman, Mr. Bush said.
Immigration related incentives would include 10-year work permits for senior executives in the reinsurance industry, flat or reduced work permit fees and the waiver of normal work permit application requirements.
Senior executives who would be granted 10-year work permits are the positions of vice president or higher, Mr. Bush said.
The waiver of normal work permit application requirements consists of the administrative processing of these applications rather than the normal board process.
In addition, Mr. Bush said direct one-on-one marketing to reinsurance chief executive officers and senior executives, as well as presentations to law firms in New York and other financial centres, will be needed to drive reinsurance business to Cayman.
Clayton Price, chairman of the Insurance Managers Association of Cayman, and host of the Cayman Captive Forum welcomed the new measures and the premier’s announcement that the regulations accompanying the new Insurance Law (2010) will be presented shortly to the industry for consultation and subsequently for deliberation by Cabinet.
“IMAC is enthusiastic as this paves the way for the formation of commercial reinsurers to incorporate in the Cayman Islands and to have a framework to operate,” Mr. Price said. “IMAC is also pleased to hear about the 10-year work permits, which will be available to reinsurance executives with a title of vice president or higher as this will provide tremendous stability to the “C” suite [senior executives], who seek to attract qualified staff.”
Cayman has explored the issue of how to attract reinsurers to the Islands in the past. A Reinsurance Task Force launched during the time of the former PPM government recommended a new Insurance Law that would give reinsurers more regulatory certainty, an enhanced immigration process that would grant reinsurers with a minimum of $250 million in capital at least 20 “key employee” positions and a smoother immigration process. However, until last week neither the previous nor the current government had presented concrete immigration incentives to attract the industry.
The new Insurance Law, however, has introduced new licence categories for catastrophe bond issuers, special purpose insurers and reinsurers and contains a dedicated regulatory regime for these types of insurance products.
Mr. Bush said Cayman’s advantages when attracting reinsurers include no income, payroll, property or corporate taxes. “As long as I am premier, there will be no such taxes,” Mr. Bush said.
Compared to Bermuda, one of the main domiciles for reinsurers, Cayman offers an attractive jurisdiction to work and reside and provides expatriate workers with the opportunity to own property. Labour costs in the reinsurance industry are also lower than in Bermuda.
“Being a short flight to the United States with several gateways including New York, Atlanta, Charlotte, Houston and Miami as well as flights to the UK and Canada, the Cayman Islands is well positioned having put the updated legislation and immigration amendments into effect to become the domicile of choice for starting a commercial reinsurer,” Mr. Price said.
Bermuda historically enjoyed the advantage of a tax treaty with the US, which came into effect in 1986 and governs the taxation of insurance premiums.
“Bermuda’s proximity to financial centres such as New York and London with daily direct flights to each also gives Bermuda a bit of a geographic edge. However the Cayman Islands Government’s vision to implement ways to cut through bureaucratic red tape to facilitate business needs plus the quality of life should greatly assist in attracting commercial reinsurers,” Mr. Price said.
Another significant difference between the two jurisdictions is that Bermuda is seeking third party equivalence with Solvency II, a fundamental review of the capital adequacy regime for the insurance industry developed in the European Union.
Solvency II is expected to increase demand for reinsurance as one of the tools for insurance companies to lower their additional capital requirements as a result of the new rules. However, reinsurers themselves face higher capital requirements and capital costs under Solvency II.
Cayman has not adopted the new rules and has not committed to do so in the future, which could be attractive to certain reinsurers that are looking for a domicile with a lower capital threshold.