Earlier this year the Cayman Islands Government, with the assistance of the Insurance Managers Association of the Cayman Islands, held an Insurance Business Symposium with 15 overseas insurance specialists to discuss the captive and reinsurance industries. IMAC Chairman Ron Sulisz reports.
The goals of the symposium were to ensure that the Cayman Islands is positioned to maintain its status as the second largest captive domicile in the world and discuss new business opportunities in this industry, At the same time the conference also discussed the limited reinsurance industry in the Cayman Islands at the present time, to determine what is needed to enhance this industry to make it more attractive to new reinsurance companies being established or existing reinsurance companies evaluating redomestication.
The daylong event was moderated by the Chairman of the Cayman Islands Insurance Association and Chief Executive Officer of Island Heritage Garth MacDonald.
The government’s primary focus in staging the symposium was to gain input from overseas insurance specialists who have been transacting business in the Cayman Islands for over 10 years and have brought to the Island a significant volume of business. Representing the government was Premier McKeeva Bush, the Acting Chief Officer of Financial Services Dax Basdeo and the Deputy Chief Officer of Financial Services Samuel Rose.
Representing IMAC were Chairman Ron Sulisz and the Vice Chairman Monique Jackson.
Also in attendance was the Cayman Islands Monetary Authority, represented by Managing Director Cindy Scotland; Head of Insurance Gordon Rowell; and Chairman of the CIMA Board George McCarthy.
Other on island invitees included Bart Hedges of Greenlight Re, who shared his experience in establishing a reinsurance company in the Cayman Islands, and John Ferrari, chairman of the Cayman Islands Society of Professional Accountants insurance subcommittee and a partner at KPMG.
Fifteen overseas specialists were also in attendance.
Subsequent to the daylong event, all of the attendees commented upon its success, and felt the specific goals identified were achieved.
Retaining the number two spot
Cayman is able to maintain its position as the second largest domicile for captives (second only to Bermuda) because of two major key success factors.
First is regulation. The government had the foresight in 1979 to enact legislation to allow for the formation of captive insurance companies and have refined the Insurance Law over the years to allow the industry to consistently have reasonable and competitive regulation. This regulation has been enforced by the Cayman Islands Monetary Authority on a consistent basis over the years, which has allowed local and overseas industry consultants to be able to promote the industry through their knowledge. In addition, the government’s private sector consultative approach toward any proposed changes in the regulation enhances the industry’s knowledge of the legislation; hence their ability to promote.
Second is the spirit of cooperation in the industry, particularly among the insurance managers. The most impressive part of IMAC is how well these competing service providers work together with the common goal of promoting the Cayman Islands and enhancing its reputation.
It is noticeable and appreciated by the overseas industry consultants that bring the business to the island, particularly when it comes to events such as the annual Cayman Captive Forum held in November/December each year, which is the largest annual conference held in the Cayman Islands; or the IMAC Educational Scholarship Fund.
Several ideas were raised regarding new business opportunities for the captive industry to pursue, as well as ideas on how to grow the reinsurance industry. New geographical and industry sectors were identified, since it is perceived that the Cayman Islands industry is highly reliant on certain states within the United States, and in particular, on the health care industry.
In fact, 43 per cent of the captives in the Cayman Islands are from the healthcare industry, with the majority of these being medical malpractice programmes. The effect of the United States healthcare reform on the industry was discussed and although it is not known at the present time, it was felt that it would not have a detrimental effect on this industry.
Enhancements to some existing products were discussed, such as segregated portfolio companies and special purpose vehicles like catastrophe bonds, to not only offer a higher quality product to the consumer, but also to make available new opportunities.
For the reinsurance industry, the Reinsurance Task Force paper of March 2008 was reviewed, and some recent feasibility study weaknesses were presented and comments from people in the industry were accumulated.
One of the major weaknesses identified was the lack of specific legislation for open market reinsurance companies. It was noted that this should be rectified in the near future with the implementation of a new Insurance Law, with specific regulations for solvency and capitalisation for open market reinsurance companies to be implemented sometime soon thereafter.
In order to develop the reinsurance industry, it was noted that a road show needs to occur to inform the decision makers for this industry regarding the changes made in the Cayman Islands and to demonstrate that not only can it compete with other domiciles in this market, but to explain why the Cayman Islands should be chosen.
A working group consisting of on island representatives has been established to produce a recommendations report, to keep the overseas specialists involved in the symposium informed, and to monitor the progress of the recommendations from the report.