The Cayman Islands government’s new property insurance fee may not apply to valuable real estate assets insured overseas, which one insurance industry representative estimated could account for some 50 per cent of Cayman’s property insurance premiums.
Lawmakers approved the increased charge as part of the Stamp Duty (Amendment) Bill, 2012, during the Legislative Assembly session Monday, 26 November.
Replacing the flat fee of $12 on property insurance premiums, the new fee is “2 per cent of the cost of new or renewed property insurance premiums”.
During the meeting, North Side Member of the Legislative Assembly Ezzard Miller said, “I am aware that there are several large properties in the country that purchase their insurance abroad and so they would be exempt from this fee.”
Cayman Islands Insurance Association president Derry Graham said Mr. Miller was “absolutely correct” in his observation, saying that many large properties, such as hotels, are insured through overseas companies such as Lloyd’s of London.
“You can imagine that nobody really knows the number,” Mr. Graham said. “I would guess that at least 50 per cent of Cayman’s property business is placed offshore.”
Mr. Graham clarified he means that at least 50 per cent of the total value of insurance premiums for Cayman properties are for policies through overseas providers, not local insurance companies, placing them out of reach of the Stamp Duty Law.
For example, court records following Hurricane Ivan in 2004 indicate that the former Hyatt property was insured through Lloyd’s and Texas-based Houston Casualty Company.
The new fee for a property insurance premium of $10,000 is $200, and for $1 million is $20,000.
When the bill was made public in early October, Mr. Graham said his organisation was not consulted about it.
At first, Cayman Islands Premier McKeeva Bush seemed to disagree with Mr. Miller, saying the fee would apply to all insured Cayman properties, but not, for example, to the captive insurance sector. After several minutes of discussion, Mr. Bush admitted that Mr. Miller’s concern is a valid one. Mr. Bush said he would look into modifying guidelines for property insurance similar to what has been done for health insurance.
“There are several points that I do not think that we can cover at this point in time in this bill. And I’ve given the member the assurance that I am prepared to look at the Insurance Law to see where people might be getting away, as they are trying to say, or that they are implying. And then see how we can deal with it from that perspective,” Mr. Bush said.
Mr. Bush said he, for one, is “nationalistic enough” to insure his property through a local company.
Mr. Miller said relevant changes to the Insurance Law may be to mandate that local properties be insured by local companies. He cautioned against forcing all property owners to have to insure their properties, however.
Mr. Graham said, “I would suggest that if they are a registered Caymanian company like the big hotels, and get the benefits of importing all their fixtures and fittings with special duty compensations and things like that – Why aren’t they putting something back into the community by placing the policies here, and paying that duty that everybody else is paying?”
He said the 2 per cent fee may lead owners to underinsure their properties, or else continue to encourage bigger properties to seek insurance offshore.
Mr. Graham said, “From the industry’s point of view, the collection of stamp duties is putting a strain on the insurance companies in the system. We’re getting no compensation for all the additional work that’s involved. I hope the public understands that this is not a cost the insurance companies are causing to be incurred. It is a government tax.”