Annual statistics: Mixed results for financial services

The Cayman Islands Monetary Authority
Number of Cayman-based entities in 2018-2019

Business appears to be booming, with the economy growing at close to 3% per year, according to latest statistics.

However, data from the Cayman Islands Monetary Authority shows not all financial services statistics for 2019 are positive.

The number of banks, insurers and funds registered in Cayman dropped last year, as did the number of associated service providers.

Offshore banks, once the mainstay of Cayman’s financial industry with more than 600 banks in the late 1990s, have continued their perpetual decline. The number of banks dropped 6% last year to 125, as industry consolidation and an ever-increasing volume of regulations, compliance requirements and added operational costs are taking their toll.

Industry consolidation is also a topic for captive insurers. Cayman is the dominant jurisdiction for healthcare captives and with market forces pushing healthcare providers in the US to merge, some self-insurers are rolled into one. Others have simply come to the end of their lifespan, according to the Insurance Managers Association of Cayman.

Registered funds, the current industry flagship, declined by 1.2% to 10,857 last year. However, this is not the complete picture. Many private equity funds were not registered with CIMA last year, but they will be in the future after the introduction of a new Private Funds Law in February 2020.

Private equity funds are often structured as exempted limited partnerships, and partnership formations are the bright spot of Cayman’s 2019 statistics. After years of significant growth, active partnerships in Cayman jumped 9.5% to 28,895 by the end of October 2019, the most recent available figure.

The number of trust companies and trusts also increased 1.4% and 1.1% respectively. There are about 1,750 trusts registered in Cayman.

US dollars in millions. Source: Bank for International Settlements, International Monetary Fund

Active companies on the Cayman Islands register grew even more strongly by 2.3% to 109,806 at the end of October 2019. New economic substance rules, which force certain Cayman-based companies to demonstrate sufficient economic activity on island to be able to take advantage of the zero-tax regime, have not yet had an effect on the company statistics.

The downward trajectory of banking and the more positive picture for funds and companies is also visible in the Cayman’s capital flows. Cross-border assets and liabilities of Cayman’s banks have dropped from almost $2 trillion in 2007 to $658 billion in the third quarter of last year. Cayman is now ranked the 12th-largest international banking centre based on the value of its cross-border assets and liabilities.

Equity and debt portfolio holdings in Cayman, in contrast, increased from $1.68 trillion in 2015 to $2.34 trillion in 2018, according to the International Monetary Fund.

Support local journalism. Subscribe to the all-access pass for the Cayman Compass.

Subscribe now