Cayman Captive Forum attracts huge interest

One event that has proven very resilient in a difficult economic climate in 2010 was the Cayman Captive Forum in December, which attracted 1,044 registrants, making it one of the largest captive conference in the world and most certainly the largest conference to be held in Cayman. The organisers, the Insurance Managers Association of Cayman, said they were “pleased that the event encouraged so many visitors to Cayman in these slow economic times, especially at a time of the year when the Jazz fest would usually be on”.

There is no doubt that the Cayman Captive Forum is also in high demand given the weather differential between the Cayman Islands and North America in December. The closing reception on the beach of the Ritz-Carlton saw 900 delegates attending. But it is also the event’s reputation for quality speakers and presentations that draws in a large crowd.

This year was no different with key note speaker Jeffrey Ma, member of the famous MIT Blackjack Team, entertaining the audience with stories that related his experience in casino games with business decision making. Omission bias and the reluctance to stick to counterintuitive strategies that are nonetheless correct are just two areas he mentioned where business decision makers can learn from game strategy. Trusting the maths to manage risk can still mean making risky but calculated decisions, he showed.

Stephen Cross, the CEO of AON Global Risk Consulting, gave an overview of the main disasters and crises of 2010 from the Greek debt crisis, the volcanic eruption in Iceland and the oil spill in the Gulf of Mexico to the earthquake in Haiti.

While some of the events appeared to be isolated, they in fact had a global effect that could indirectly impact companies anywhere in the world, be it in financing, in the supply chain, through the exposure of staff or in terms of a company’s reputation.

The presentation served as a reminder that with increased globalisation disasters, catastrophes and accidents are rarely contained at a local level. In addition new risks are emerging, Cross demonstrated, naming social media risk, piracy, outsourcing risk, do it yourself risk and cyber risk as examples.

Looking at man-made risks Cross stated: “In my personal view social media risk is the biggest and most impactful coming storm that all of us are going to face.”

Everybody is exposed to it, yet there is no real insurance market responding to it. He described the process of spreading information on a company as starting in social media, where it is picked up by mainstream media before filtering back to social media. “This is risk. Think about what Greenpeace did to BP,” he said. There is no insurance market to protect a brand or a company’s reputation, Cross noted.

This was complemented by a panel discussion on how healthcare providers have implemented enterprise risk management (ERM) into an organisation. The panellists agreed that after having identified risks and assessing the probability and potential impact of a risk, they would prioritise and decide live with certain risks, while mitigating or managing others. 

Although it involves a two to three year cycle, panellists advocated that smaller organisation that are not certain, think they do not have the resources or lack a champion for the project should reconsider.

The Captive Forum combines over three days dedicated captive training sessions with more general speaker presentations and specialised captive-centred panel discussions.

One of the debates highlighted the strain on the relationship between parent companies and captives when it comes to capital during difficult economic times. 

Clayton Price, managing director with Marsh Management Services (Cayman), observed increasing demand for the capital committed to a captive by parent companies and noted that the right balance must be struck.

Jay Waters, a risk manager at University Hospitals in Cleveland agreed and noted a pressure from parent companies to take “idle capital” from the captives just at the time when they need it most. 

Greenlight Re’s Brendan Barry said that capital is always available when a company does not need it. The importance is to build a business operations structure that is flexible enough, he said, “so that you don’t end up going to the markets for capital when you need it”.

Panellists concurred that a reinsurance programme could be one way to achieve that flexibility.

“What reinsurance really provides is a call option on capital when the organisation is at a particular stress point,” Barry said, but noted that establishing a long-term relationship with the reinsurer is imperative for the captive.

Given the strong concentration of healthcare captives in Cayman, the US healthcare reform was another dominating issue at the event together with other regulatory changes, such as the new Cayman Islands Insurance Law (2010).