Bermuda’s reinsurance industry fears a boom in the sector in the Cayman Islands could lose it valuable business, a veteran executive has said.
The Bermuda insider, who asked not to be named, said the country had a history of concern over its Caribbean rival and many envied its more international business-friendly policies and relatively strong economy.
He added, “Bermuda has always been worried about the Cayman Islands and that’s got worse since the economy started to suffer.
“There is no doubt the reinsurance industry is watching developments in Cayman carefully. The sector in Cayman is small compared to Bermuda, but it has the capacity to grow.”
The insider said, “I agree that policies in Bermuda restrict growth and that Cayman has, to a large extent, tailored its policies on things like immigration to make itself attractive to investors. We should be worried.
“As the economy has stagnated and Cayman’s has thrived, people have become more nervous about the future.”
Another Bermuda insider, who also asked not to be named, highlighted that December’s Insurance Managers Association of Cayman Captive Forum, billed as the world’s largest healthcare captive managers conference, had been well-attended.
He said, “I think we are not alive to this. The Bermuda Business Development Agency has lost its way. Essentially, it doesn’t know how to compete.
“When you look at Cayman and the types of things they are doing to retain people, Bermuda is now behind the eight ball and way behind the curve.”
The expert added that he knew of “a number of different entities” in Bermuda that were eyeing Cayman and had already set up secondary offices in the country and had “moved a lot of people to Cayman”.
‘Do it better’
He claimed that some had “lost patience” with the Bermuda government and “excessive tax and restrictive immigration”.
The expert said, “Cayman copied what Bermuda did and did it better. What Bermuda needs to do now is the same thing – look at Cayman and do it better.”
He said, “Bermuda should be scared … The threat from Cayman over the last five years and the next five years is probably the biggest threat to our success. I believe that firmly.”
The insider added that if the Association of Bermuda Insurers and Reinsurers was on the ball and continued to protect the industry, the country would “be OK”.
But he warned that the Atlantic international business centre had not done enough to protect its captive industry and “lost the fund industry to Cayman 15 years ago”.
He said, “It’s in danger of becoming a junior domicile to Cayman.”
But one Cayman financial services insider, who asked not to be named, insisted the country was not trying to steal Bermuda’s lunch – but that he could see how the Atlantic island might think it was.
Cayman attracting new business
The source said, “It’s not so much that we are directly competing with Bermuda, although I can see why that’s their perception.”
He added that Cayman was keen to add “new strings to its bow” and that reinsurance complemented the existing financial services industry.
“Bermuda has taken it a lot more directly than we have perceived it,” he said.
The insider highlighted that Cayman had attracted new business, not that which had been lured from Bermuda.
He said, “We are not really focused on competing with Bermuda. We serve different markets to a large extent.”
The source said that, unlike Bermuda, Cayman was not a European Union Solvency II equivalent jurisdiction, which entitled non-EU countries to be given similar treatment to those from the bloc.
He added that gave Bermuda “broader international appeal”, while Cayman’s market was “predominantly North American-focused”.
Gregg Mitchell, the chairman of the Cayman International Reinsurance Companies Association, insisted it was “misguided” to suggest the country was adapting its regulations to “steal” business from Bermuda.
He said, “If anything, Bermuda has moved further away from Cayman, rather than the other way around.
Mitchell added, “CIRCA does not promote the Cayman jurisdiction by comparing it to others, nor do we position ourselves based on perceived advantages over competing jurisdictions.
“Furthermore, we find it difficult to believe that any governing, regulatory, or industry body would act in the manner described—though an individual acting in their own interest may”.
Steve McIntosh, Cayman Finance CEO, said the reinsurance industry was worth more than $280 million a year to the country and that the figure was expected to grow “significantly”.
He added that 2023 figures from the Association of Bermuda Insurers and Reinsurers said that the business was worth $815 million a year to the country and had grown 13% over the previous year.
“What that shows is that the recent growth in Cayman’s reinsurance sector has not come at the cost of growth in Bermuda,” McIntosh said.
He agreed that Bermuda and Cayman served different markets.
McIntosh highlighted tax policy, immigration policy and promotional efforts as other factors involved in Cayman’s rise in the reinsurance world.
He said Cayman had not introduced any new corporate income taxes, unlike Bermuda, where a new 15% corporate profits tax had been imposed.
McIntosh added that Cayman had “proven willing to issue work permits for hard-to-fill roles in the sector like actuaries and underwriters”, but also encouraged the development of domestic talent and made it easier for people to acquire permanent residency, which had increased its attractiveness to overseas investors.
Raising Cayman’s profile
He said the [Re]Connect reinsurance event in Cayman in April, the first of its kind, and a similar event at the Harvard Club in New York in September had raised the country’s profile.
Michael Fahy, who was senate leader and a cabinet minister in the One Bermuda Alliance government from 2012-17, said earlier this year that Cayman had “done everything it can” to attract investment.
Fahy wrote in an op-ed in The Royal Gazette, Bermuda’s only newspaper, “It stole our lunch, and it did this very successfully by poaching the best legislation and ideas from Bermuda – and improving upon them.
“Cayman is now after our dinner. This is true in both the tourism sector and the international business sector.”
The latest Bermuda government statistics have shown the population is falling and hit a 20-year low in 2022 of about 63,540.
But the population of Cayman has steadily increased to almost 74,460 this year.
A comment on a July story in The Royal Gazette about a Bermuda-based reinsurer opening a subsidiary in Cayman said, “Lots of Bermuda companies setting up in Cayman … mass exodus would appear to be coming.”
Another poster on a story in April about the growth of the Cayman reinsurance sector wrote, “So they seem to be doing everything right and we are messing the bed … has the makings of a perfect storm.”
Bermuda’s Sylvan Richards, then a One Bermuda Alliance MP and shadow minister of home affairs and the environment, said in 2019, “I have to look at Cayman Islands. Cayman Islands is eating our lunch every day because they have done what needs to be done with their immigration policies to encourage investment.
“Bermuda is being left behind because of our mindset towards immigration.”
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