IMAC: Captive insurance industry in Cayman booming

The Cayman Islands Monetary Authority has reported that it received 67 applications for new licenses in 2012, with 52 licenses granted and the remainder scheduled for approval in 2013.

Since 1 January, one licence has been approved and another 11 have been approved in principle. The total number of new licences accounts for an increase of more than 58 per cent over 2011 and is the biggest year for captives since the hard market of 2004, according to the Insurance Managers Association of Cayman.

Although Cayman may be largely known as being a healthcare captive domicile, the 52 new formations came from various sectors including healthcare, life reinsurance, property and casualty reinsurance, manufacturing and technology. A number of group captives were also formed as segregated portfolio companies.

Existing Cayman captives also dramatically grew their assets. Total premiums written by captives were reported at US$11.8 billion and total assets under management climbed to US$88.1 billion, their highest ever levels, which grew 24 per cent and 51 per cent, respectively.

“Cayman understands the captive insurance business and the role it plays in the risk management space, and when I say Cayman, I mean the industry together with the regulator,” said Cayman Insurance Managers Association Chairman Rob Leadbetter. “These statistics are not surprising to us because we have been building our core competencies over decades to make Cayman the ‘go to’ domicile in the insurance industry.”

There are some 5,000 captives globally and since 1980, 3,095 captives have been licensed in the Cayman Islands, IMAC said. The Cayman Islands remains a popular jurisdiction for captive formations, which including the 780 segregated portfolios, is close to 1,500 entities. This popularity is attributable to a combination of sensible legislative framework, the relationship between the association and the monetary authority, together with a harmonised regulatory environment, IMAC noted.

With the new Insurance Law now in place, Cayman expects to welcome even more insurance business to its shores, according to the association.

The new law is designed to clearly differentiate between the domestic and international insurance markets in the Cayman Islands and to regulate each in accordance with its own requirements. It strengthens legislation to protect Cayman entities and brings the law formally into line with international standards.

It also sets out a framework for developing the reinsurance market and to create a clearer understanding for the insurance linked securities market. Most importantly, the association said, “it embraces the concept of ‘proportionality’ and addresses entities based on the nature, scale and scope of risk”.