Captive Assessment digs into official CIMA statistics between 2020 and 2024 to select what has pushed development in Cayman’s captive insurance coverage market.
The SPC laws permits a substantial amount of flexibility in construction.
The Cayman Islands has been a significant beneficiary of the onerous market interval of the previous few years, based on statistics for the domicile.
Utilizing official insurance coverage figures obtained from the Cayman Islands Financial Authority (CIMA), Captive Assessment has compiled an in depth report on Cayman’s captive development story from year-end 2020 to the top of Q3 2024, and assessed the traits and altering dynamics inside Cayman’s captive insurance coverage market throughout this time. Key development figures for the interval are proven under.
Key development figures This autumn 2020–Q3 2024
There was development in Cayman throughout all varieties of conventional captive insurance coverage firms, which we depend as pure captives, group captives and segregated portfolio firms (SPCs). Evaluating figures from December 31, 2020 to September 30, 2024, there are actually 12 extra pure captives, six extra group captives and 6 extra SPCs.
Premium has risen throughout all captive varieties in that point: pure by $1.6 billion, group by $1.4 billion, and SPC by $3.3 billion. Moreover, property worth has risen by $4.0 billion for pure captives, $3.6 billion for group captives, and $9.4 billion for SPCs.
These numbers quantity to 4.4 p.c quantity development, 66.6 p.c premium development, and 46 p.c asset development in Cayman’s captive insurance coverage market for the reason that finish of 2020.
Inside Cayman’s wider worldwide insurance coverage sector, which consists of the three captive varieties in addition to industrial insurers, reinsurance firms and particular goal automobiles, there has additionally been robust development. The full quantity has risen from 652 to 696 within the time interval, whereas complete premium has risen from $20.9 to $42 billion and property worth has risen from $70.8 to $154 billion.
Cayman’s captive insurance coverage market information
Present state of the market
Of the 696 worldwide insurance coverage firms (IICs) at Q3 2024, 569 have been captives. There have been 293 pure captives, 131 group captives, 145 SPCs, 94 reinsurance firms, 16 industrial insurers and 17 particular goal automobiles.
Cayman is the third-largest domicile on the planet by variety of captives. Solely Vermont, with 678 captives at Q3 2024, and Bermuda, with 631 captives on the finish of 2023, have extra.
To the top of September, there had been 19 new captives shaped this 12 months in Cayman—eight pure captives, two group captives and 9 SPCs.
In complete 29 new licences have been issued by CIMA to IICs within the first 9 months of the 12 months, whereas 16 have been cancelled.
This places it on par with current years. In all of 2023 there have been 41 new IICs shaped (together with 26 captives), and 28 licences cancelled. On common 36.75 IICs shaped per 12 months between 2020 and 2023, and 27.5 had their licence cancelled.
Licence replace 2024
Captive managers
Obtained information on Cayman’s market delivers some helpful data on the expansion of captive managers within the domicile.
In 2024, SRS has overtaken Marsh as the most important supervisor of IICs by quantity, after a major bounce from managing 106 in the beginning of the 12 months, to 115 by the top of September.
Jenny Pooley, managing director of SRS Cayman, informed Captive Assessment that SPCs had been particularly necessary to development within the domicile.
“There was substantive development in SPCs, permitting for extra progressive makes use of for the captive and a wider participation from totally different insureds,” she stated.
“The SPC laws permits a substantial amount of flexibility in construction and use of the SPC and its cells, with out onerous extra regulatory necessities.”
9 totally different managers have efficiently assisted within the formation of a brand new captive this 12 months, together with all the massive world managers, plus firms with a robust native presence in Cayman.
These widespread successes have enabled a thriving captive insurance coverage business to develop in Cayman, and James Trundle, vp of Cayman-based captive supervisor International Captive Administration (GCM), informed Captive Assessment that this was a major purpose Cayman has been in a position to proceed rising.
“The principal driving issue for any organisation trying to arrange a Cayman captive is the entry to skilled managers, auditors, tax advisors, attorneys and actuaries who actually perceive the captive insurance coverage mannequin,” he stated.
“This, coupled with applicable regulation and open communications between captive house owners and the regulator, continues to drive Cayman ahead because the primary alternative as an offshore domicile.”
Cayman’s captive managers
Development traits
Cayman has lengthy held a fame as a specialist domicile for healthcare establishments—a degree well-demonstrated by the preferred courses written by Cayman captives over the past 5 years. Round 24 p.c of Cayman’s IICs had medical malpractice legal responsibility as their major class of enterprise in 2020, and it remained the preferred major class of enterprise amongst Cayman IICs in 2021.
Nevertheless, the affect of worldwide market traits are mirrored in Cayman’s figures, as courses comparable to employees’ compensation, property and normal legal responsibility have pushed the best development in Cayman since 2020.
From 2022, employees’ compensation has been the first line of enterprise written by essentially the most Cayman captives, as extra US corporations acknowledge the advantages of penning this worthwhile line by means of their very own captive. In the meantime, regardless of the variety of IICs rising yearly, fewer have medical malpractice as their major class of enterprise.
“Cayman continues to see important development within the single mother or father sector in industries from exterior the normal healthcare house,” Trundle stated.
“Within the final six months, GCM has labored on establishing new single mother or father constructions for building firms, oil and fuel producers and church organisations.”
The onerous property market has led many captive house owners all over the world to take extra of this publicity into their captive, and Cayman definitely seems no totally different. Premium written by IICs with property as its major class has grown exponentially over the past 5 years—from just below $1.7 billion in 2020 to over $7.2 billion in Q3 2024.
Social inflation and the rising value of nuclear jury verdicts within the US has additionally led to sharp will increase in legal responsibility premiums—and the figures present extra Cayman IICs writing normal legal responsibility as their major class of enterprise.
Major class of enterprise: premium change
Healthcare
Healthcare stays an necessary a part of Cayman’s market. Whereas strains comparable to employees’ compensation, property and normal legal responsibility have risen in significance amongst Cayman’s captive house owners, at Q3 2024 20 p.c of Cayman’s IICs nonetheless had medical malpractice as their major class of enterprise—136 firms.
Regardless of this quantity falling 12 months on 12 months, the premium written by this group of captives has risen, and was at $3.2 billion at Q3 2024, in comparison with $2.7 billion in 2020.
“There was an elevated curiosity in a broader vary of protection strains, however total, healthcare captives nonetheless characterize a good portion of complete licences in Cayman,” Pooley stated.
She stated there have been rising alternatives for Cayman captives to step in the place the industrial market denies or carves out protection for a specific subset of dangers, and highlighted sexual abuse and molestation protection for healthcare techniques as a very good instance of this.
“I anticipate healthcare nonetheless to play a significant half within the Cayman captive business within the subsequent few years with the unprecedented mega verdicts and the continued charge will increase within the medical malpractice market,” Pooley added.
IICs by major class of enterprise Q3 2024
Threat location
In the case of danger location, the US has constantly been the dominant location of danger insured by Cayman IICs.
Between 2020 and 2024 the proportion of IICs with a danger location of North America has been 89 to 90 p.c, and few anticipate that stat to vary considerably sooner or later. At Q3 2024 Cayman’s 619 North America-based IICs wrote $36.2 billion of premium, or 88.9 p.c of complete premium. Nonetheless, many out there are trying into alternatives for extra non-US dangers to be written in Cayman.
“The standard supply of the insurance coverage danger is predominantly the US, however we’re seeing curiosity and formations from mother or father firms in Canada, Latin America, and Asia,” Trundle stated.
The Cayman authorities has workplaces in London and Singapore that promote the jurisdiction, and Trundle added that Latin America and Canada are goal markets for Cayman, largely as a result of time distinction will not be a consider these conditions.
In a extra digitally linked world, nonetheless, time distinction will not be an element, he stated, highlighting that GCM had shaped a captive with mother or father operations in Singapore.
Threat location
Regional danger by premiums
Premium: North America vs All IICs
Bermuda has a much more numerous captive market by danger location, with 421 of its 633 (66.5 p.c) captives in 2022 having house owners from North America writing gross premiums of $18.9 billion (60.3 p.c).
Paul Macey, president of USA Threat, feels that Cayman has to do extra to unfold the phrase that the domicile isn’t just for US shoppers.
Like Trundle, he has seen alternatives in Latin America, and he thinks there could also be methods to faucet into the Asian market. Nevertheless, with European nations displaying larger curiosity in passing captive laws, he thinks it might restrict some alternatives on this area.
“A number of of the legislation corporations in Cayman have workplaces within the Far East which might present development alternatives for the insurance coverage sector,” he stated.
“The event of European domiciles might curtail the institution of captives for European firms, and we have to monitor how that’s growing.”
Domicile comparability
In comparison with its largest rival domiciles, as much as the top of Q3 2024 Vermont has licensed 34 new captives, whereas Bermuda has 9 new captives. Cayman had licensed 19 new captives as much as the top of Q3.
Whereas Cayman’s figures evaluate very favourably towards different offshore domiciles, it’s extra of a problem competing with in style US onshore domiciles.
“The primary query that’s all the time requested when deciding on a domicile is ‘onshore or offshore?’,” Macey stated. “Most often the choice is a straightforward one to make. Self-procurement guidelines might dictate that an onshore domicile is best suited.”
Since onshore domiciles are actually in a position to settle for possession constructions that have been beforehand solely out there offshore, Macey stated that the enjoying area has levelled and that domicile choice is turning into tougher, and that remaining versatile can be key to Cayman’s continued success.
“Cayman will proceed to compete because it all the time has, by providing a stable, politically secure jurisdiction, with sound and applicable regulation and skilled and educated on-island service suppliers,” added Trundle.
“The choice to be onshore versus offshore might come all the way down to the mindset of the house owners, so we simply must proceed to supply one of the best product we are able to, backed up by the fantastic waters of the Caribbean Sea and the golden sand of Seven Mile Seashore.”
Comparability of captive numbers in main domiciles
Authorities help
The vocal help of the federal government for the insurance coverage sector is one other key purpose Cayman has been in a position to stay a horny captive domicile possibility over the past 5 years.
“It has confirmed its intention to stay tax-neutral and to supply the mandatory assets to the CIMA for efficient business oversight and to stay agile in supporting captives’ rising wants and makes use of,” stated Pooley.
Macey added that stability and consistency are another of Cayman’s largest promoting factors over the previous few years.
“Cayman has been a frontrunner in growing company governance constructions to make sure that new insurance coverage entities can meet their obligations,” he stated.
“This may increasingly seem to an over-reach at occasions, however shoppers recognize the truth that Cayman takes this very significantly and desires shoppers to know what they’re doing and have an efficient administration plan in place.”
Rising reinsurance market
Of all IICs in Cayman at Q3 2024, 81.8 p.c are captives. This determine had been 83.6 p.c in 2020, illustrating the rise in prominence of non-captive IICs in Cayman.
Different stats notably underline this pattern. Throughout the time interval, captives’ share of IIC premium has fallen from 45.4 to 37.6 p.c, and share of IIC property worth from 52.6 to 35.2 p.c.
Cayman has particularly targeted on rising its reinsurance sector over the past 5 years.
The variety of reinsurance firms in Cayman has grown 12 months on 12 months, from 58 on the finish of 2020 writing $9.3 billion, to 94 writing $25.2 billion at Q3 2024.
Menelik Miller, head of regulatory at Appleby, informed Captive Assessment that there have been a number of causes Cayman had been in a position to entice extra reinsurers in recent times, one being CIMA’s regulatory framework.
“As Cayman has not pursued the EU Solvency II framework, CIMA is ready to accommodate extra US Nationwide Affiliation of Insurance coverage Commissioners-focused capital fashions that extra carefully align with US cedants and their regulatory regimes,” he stated.
“The steadiness between robust regulatory oversight coupled with the environment friendly use of capital and operational flexibility has made Cayman a compelling jurisdiction of alternative for reinsurers.”
Different pull elements embody Cayman’s tax-neutral standing, proximity to the US, and the jurisdiction’s extremely expert workforce. Trundle added that a part of the attraction was Cayman’s decrease capital necessities for establishing a brand new reinsurer, in comparison with Bermuda.
“There has subsequently been super development on this section, and its continued development must be seen as a chance to develop the jurisdiction, fairly than a risk to conventional captive insurance coverage,” he added.
Profit to captives
Miller emphasised that there have been some ways captives may gain advantage from Cayman’s burgeoning reinsurance scene, and that because the reinsurance market has expanded, it has introduced in a further wealth of specialized experience and assets.
This contains an inflow of actuaries, specialist authorized advisors, and different professionals, which means the infrastructure supporting the Cayman insurance coverage business has develop into more and more refined.
Miller stated this had made it simpler for captives to entry top-tier companies and experience domestically, reinforcing the attractiveness of Cayman as a domicile of alternative.
“One other facet of this synergy lies within the attraction of institutional traders. The expansion in reinsurance has drawn important capital to the jurisdiction which, in flip, has supported captives by facilitating entry to progressive danger switch options and elevated monetary stability,” Miller added.
“Captives now discover it simpler to handle complicated dangers by working with reinsurers which are integrated in and/or conversant in Cayman, notably in key sectors comparable to healthcare and specialty insurance coverage.”
Future development
Macey predicts there will likely be continued development for Cayman’s captive insurance coverage sector, albeit at a slower charge, with elevated exercise within the reinsurance sector, together with “one or two massive names within the P&C sector forming reinsurance entities in Cayman”.
He stated that Cayman’s insurance coverage business advantages from the expansion of the monetary business usually. Nevertheless, there should still be challenges the jurisdiction wants to beat.
“We can’t management the tax legal guidelines of different nations, and this can all the time be a problem for us,” he stated. “If the US imposes modifications that make it tougher for a US firm to ascertain a non-US entity, we will likely be in a tough place.”
Macey clarified he doesn’t anticipate this to occur, however that if it did, there can be little Cayman might do.
It highlights the worth to Cayman of trying past the US for the situation of its danger.
For Trundle, one of many biggest challenges to beat is anti-offshore sentiment and media stories. Whereas Cayman has fared higher than different offshore domiciles in recent times, he thinks that Cayman has to supply unified responses by means of the Insurance coverage Managers Affiliation of Cayman and different our bodies comparable to Cayman Finance to counter adverse messaging.
If it could actually overcome these challenges there’s positivity that the domicile can proceed rising at the same time as industrial markets soften in coming years. Then Cayman’s future route of development could possibly be very similar to that of different markets, specializing in rising dangers which are troublesome to position within the industrial market.
“Extra alternatives will develop for conventional captives to insure strains of protection comparable to cyber, whereas industries comparable to renewable energies and last-mile supply drivers have proven important development and the necessity to use various danger switch,” Trundle stated.
“The business will proceed to go from power to power based mostly on the onerous work of its devoted finance professionals, its robust regulatory setting and its potential to adapt. We’re excited to be a part of the journey.”
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