It is the Cayman Islands government’s stated aim and priority to establish Cayman as a centre of excellence for reinsurance, Premier McKeeva Bush told delegates at the 11th annual Insurance-Linked Securities Summit at the Grand Cayman Marriott Beach Resort on Thursday, 16 February.
Responding to criticism that Cayman was lacking the necessary human capital required by the insurance and reinsurance industries, Mr. Bush said the same could have been said about Cayman’s efforts to establish a banking sector in the 1970s and the funds sector in the 1990s.
“People said it back then and we surprised the world, because we attracted the best in these industries,” Mr. Bush.
Targeting Bermuda as the main competitor in the insurance space he noted: “Perhaps that is what my friend in the middle of the Atlantic does not realise. We have space.”
Cayman’s government is prepared to open new doors for business, he said, noting that it is precisely because of the need for expertise in the local workforce that government had decided to offer a package of concessions for the international insurance and reinsurance industry that will allow them to attract and retain the top professionals in their field.
He referred to the most recent proposed changes to the Immigration Law which introduce new categories for foreigners who have a ‘substantial business presence’ in Cayman and visiting business people.
Mr. Bush said government was also prepared to offer financial concessions which will dramatically reduce operational costs compared with other international financial centres.
Delegates heard that Cayman’s government follows a strategy of establishing “a robust regulatory environment that protects policy holders and shareholders without the dictating a company’s business model”.
Taking aim at Bermuda, Mr. Bush pointed to “zero payroll taxes” and the lack of restrictions for foreigners to buy property in Cayman.
“We have shown that we can grow, without the malice, without the inhibitions of race, without the inhibitions of transport – or have you seen many of you riding on scooters with a child on the back holding on for dear life trying to get to primary school?” he said.
Mr. Bush’s views were echoed by Jeff Mulholland, who runs insurance and pensions services for Societe Generale in the Americas. In this role, he said, he is looking at structures and arbitrages on a daily basis from a tax, regulatory and capital needs basis, constantly examining what is the most efficient jurisdiction in the world to operate in.
Based on the criteria of effective regulation and insurance expertise it will “come down to Bermuda and Cayman”, Mr. Mulholland said, emphasising that these are his personal views.
Explaining that he is not looking for light regulation but sophisticated and appropriate regulation that understands the risks of policyholders and shareholders, Mr. Mulholland, argued that effective regulation does not exist in North America and Europe. Meanwhile, Bermuda’s decision to adopt its own capital rules similar to Solvency II means that Bermuda has adopted European capital rules.
“The importance is that by kowtowing to the Europeans, Bermuda has made itself obsolete. And it is very unfortunate for them and I think it was a huge miscalculation by the Bermuda government,” Mr. Mulholland said.
The problem for Bermuda is that in the next two years a lot of business that historically has been in Bermuda will leave and relocate to Cayman, he argued.
In particular, the need for capital efficiency in the life insurance industry and the life reinsurance business which historically has sought to provide capital relief to onshore companies in North America and Europe will lead to transactions involving Cayman, he predicted.