US healthcare reform has ripple effects for Cayman captives

The U.S. Affordable Care Act and the consolidation it has caused in the healthcare industry is also having an impact on the number of healthcare captives in Cayman, which have declined and will eventually plateau, according to the Insurance Managers Association of Cayman.  

However, the remaining captives tend to be larger, better capitalized and provide the opportunity to write new lines of business. 

Mergers and acquisitions, expanded health coverage for millions of previously uninsured people, and the rising costs of healthcare have all contributed to the healthcare industry looking more carefully at the way health services are managed and delivered. This includes the coverage of healthcare-related risks through captive insurance companies in the Cayman Islands.  

“What we are seeing industry-wide is the effect of two opposing forces,” said Kieran O’Mahony, chairman of IMAC. “On the one hand, we are seeing healthcare systems merge due to a drive for synergies and economies of scale, so where there were two or even three captives heretofore, now post-merger, only one remains, which reduces the overall number of captives. On the other hand, there is an increase in the size, capitalization and usage of the remaining captives as they take on new and expanded areas of risk that would not have even been contemplated a mere five years ago – such as cyber, nonemployed physicians and employee medical stop loss risk,” he said. 

Cayman is the leading domicile for healthcare captives, with the vast majority coming out of the U.S.  

Mr. O’Mahony said, the regulatory developments and consolidation in the U.S. mean that Cayman can be the victim of its own success if only the absolute numbers are taken into account. But the captives that remain are larger, have more capital and the opportunity to take on more risk and write new lines of business. That significant change enables captive owners “to revalue and reboot their captives,” he added. 

Although competition has also significantly increased, Cayman’s proportionate, risk-based regulatory environment and proven track record mean the jurisdiction is well positioned to partner with healthcare systems to provide innovative solutions to the new, larger and more integrated and complex healthcare systems. 

Cayman still has the institutional knowledge across the jurisdiction’s different service providers and maintains a unique skill set, Mr. O’Mahony said, “but we have to work smarter, harder and longer to keep what we have and weather this headwind that were are facing purely in the healthcare sector from a numbers perspective.” 

The Cayman Islands sponsored a webinar in collaboration with AMBest around healthcare captives in May, featuring Bruce Whitmore, vice president and senior consultant of Willis Global Captive and National Healthcare Practices; Dominic Colaizzo, chairman of National Health Care Practice for Aon; Holly Meidl, healthcare practice leader of Marsh; and Adrian Lynch, managing director of Aon Cayman. The webinar is still available on the AMBest website.  

Cayman captive insurance industry representatives just returned from the RIMS Canada conference in Quebec City where they promoted Cayman as a captive domicile to Canadian. Cayman is also going to participate in the upcoming ASHRM conference, a healthcare risk-specific conference where many American healthcare providers converge to discuss industry issues. IMAC will again host a networking event for clients and other interested parties as part of its involvement at the conference. 

Kieran O’Mahony
Kieran O’Mahony