The Cayman International Reinsurance Companies Association has responded to criticism from Apollo, one of the world’s largest alternative asset managers.
CIRCA chair Faramarz Romer issued a detailed rebuttal to allegations made by Apollo about Cayman’s reinsurance regime, rejecting claims that the jurisdiction operates under weaker regulatory standards.
The episode began on 6 July when global asset manager Apollo launched an extraordinary attack on Cayman’s credibility as a reinsurance jurisdiction. It published a video where John Golden, the global head of financial regulation at both Apollo and its insurance business Athene, claimed that US policyholders were at risk because of Cayman’s “weaker regulatory environment”.
Golden made several direct attacks on Cayman during the interview, which was posted on Apollo’s website and its official LinkedIn account.
Golden described Cayman’s reinsurance regulatory regime as “choose your own adventure”. He was referring to the fact that the Cayman Islands Monetary Authority operates a more flexible regulatory model than more heavily codified regimes in the US, EU and Bermuda.
“You have a company that says, ‘I want to change this regulation’, or ‘I don’t want to do that regulation’, or ‘maybe I need to hold lower capital for this deal’. All of that is potentially on the table – all of that leads to a weaker regulatory environment in the aggregate,” said Golden, who asserted that regulatory arbitrage has fuelled the rapid growth of Cayman’s reinsurance sector.
In a professionally produced video that appeared to be aimed at a high-level US audience, Golden claimed that risks stemming from Cayman’s regulatory framework could “revert back to the US”. He said that insolvent Cayman reinsurers could leave unfunded liabilities with US insurers, potentially creating a cascading effect that could place financial pressure on some insurers and result in claims being covered by state guarantee funds.
CIRCA responds
There was a sense of disbelief among Cayman-based reinsurance executives at what was described as the outlandish nature of Golden’s comments. Several Cayman-based reinsurance sources pointed out that Apollo uses a Cayman entity in its ownership structure, while Athene also uses Cayman-based funds.
One reinsurance professional, who didn’t have permission to speak on the record, told the Compass the comments were “shameful”, and said, “I hope CIRCA responds to this.”
CIRCA has responded. Speaking to Golden’s claim that Cayman operates weaker regulatory standards, Romer said, “The Cayman Islands maintains a risk-based insurance supervisory framework founded on internationally recognised standards and supported by a comprehensive legislative and regulatory regime. Transparency is provided to the parties best positioned to act on it: regulators, cedants, rating agencies, and boards.”
Romer also sought to highlight the support that Cayman has from US insurance regulators, including the National Association of Insurance Commissioners (NAIC).
“US state regulators are regularly approving reinsurance transactions involving the Cayman Islands, and each time they sign off on an examination, it is affirmation that the structure has been vetted to their satisfaction,” said Romer.
“CIMA, for its part, maintains more than 70 cooperation arrangements, including an MOU with the NAIC, and is unlikely to approve a transaction involving a US cedent until it receives confirmation from the relevant US regulatory authority,” continued Romer.
Then Romer addressed Golden’s warning about US policyholders. “The ultimate measure of any reinsurance framework is whether policyholders are protected, which Cayman accomplishes through multiple overlapping safeguards. Funds set aside to support US policyholder obligations are ring-fenced and held separately in the US, helping to ensure they remain available to pay claims if they are ever needed, even in the unlikely event that a reinsurer experiences financial difficulties.”
At the ReConnect reinsurance conference in April, Cayman’s Premier André Ebanks announced the jurisdiction would submit a bid for qualified jurisdiction status to the NAIC this year.
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