‘No more reputational risk’: Return to Cayman proposed for Global Indemnity

Company moved to Ireland six years ago

Insurance company Global Indemnity plans to return to the Cayman Islands six years after citing political and reputational risks as reasons for moving its company seat from Cayman to Ireland.

Global Indemnity’s shareholders will vote at a special shareholder meeting on a reorganization proposal that includes a plan to re-domicile the business from Ireland to the Cayman Islands.

If the proposal is accepted, a Cayman Islands exempted company, Global Indemnity Ltd., would replace Global Indemnity plc as the ultimate holding company of several wholly owned subsidiary insurance and reinsurance companies. The group provides specialty property and casualty insurance in the United States and reinsurance worldwide.

‘No material impact’

The company said it does not expect the re-domestication to have any material impact on its financial results or its global effective tax rate.

In a filing with the Securities and Exchange Commission, Global Indemnity’s management said the move would simplify the group’s corporate and tax structures.

The filing stated, in addition to the “business friendly regulatory environment” and “predictable legal framework,” the Cayman Islands has “a flexible and stable legal and corporate governance framework, which allows a company’s board of directors’ latitude to exercise its judgment in what it deems to be in the best interests of the company, particularly with respect to extraordinary transactions.”

Negative publicity

In 2010, the group’s holding company in Cayman was replaced by an entity in Ireland after the company concluded it was exposed to “reputational, political and other risks because of negative publicity regarding companies that were incorporated in jurisdictions such as the Cayman Islands at that time.”

A review of Global Indemnity’s corporate structure in early 2016 evaluated the reasons for leaving in 2010 and determined that “developments in the laws and business environments in the Cayman Islands no longer present the same risks as may have been the case prior to 2010.”

The insurer said, “The Cayman Islands has an impeccable reputation for economic and political stability and compliance with international standards.”

The insurance group would further benefit from Cayman’s tax-neutral regime, which has no direct corporate taxation and allows for dividends to be paid in U.S. dollars without the need for shareholder approval.

If the plan is approved, shareholder rights will also change due to differences between Cayman law and Irish law. For instance, under the proposed Cayman memorandum of articles, only two-thirds of shareholder votes are needed to approve a special resolution, compared to 75 percent of votes under the company’s current rules. Special resolutions would also be required in fewer circumstances should the insurer re-domicile to Cayman.

The Nasdaq-listed company would remain subject to SEC reporting requirements, U.S. corporate governance rules and U.S. GAAP accounting standards.