Being at the right place at the right time with the right qualifications can sometimes make all the difference to a person’s career path. For Scotsman Peter MacKay, one of the early entrants into Cayman’s captive insurance management industry, the right place just happened to be Sunset House one evening in 1981. The Journal sat down over lunch at Michael’s Genuine Food & Drink to discuss his 32 years in the Cayman Islands.
Like many young people, Peter MacKay wasn’t sure what career he wanted to pursue, even after he left university.
“I came out of college and my mother says, ‘What are you going to do?’ I said ‘I have no idea.’ She says, ‘You’re becoming an accountant’.”
With that matronly edict, MacKay’s early career path was set. His mother called his uncle who arranged for him to get a job in Leeds, England, with a company called Tansley Witt. While there, he became a qualified accountant. Soon afterwards, he was ready to travel.
He set up a number of interviews in London with employers looking to place accountants in Bermuda.
“I had six interviews; every one of them said, ‘You got the job’ – first thing they said to me – never asked me a question. So clearly, I was just a commodity, not a person to them; so I turned them all down,” he said.
Eventually, an opportunity arose to work at the accounting firm Touche Ross in the Cayman Islands.
“I said ‘Does [the Cayman Islands] have a rugby club?’”
A telex was sent out asking if the Cayman Islands had a rugby club.
“No rugby club and I wouldn’t have been here,” he said.
When the answer came back by telex that Cayman did indeed have a rugby club, the decision was made and MacKay arrived in Grand Cayman in June 1980, at the age of 26.
There were only around 16,500 people living on Grand Cayman when MacKay arrived. Through rugby, however, MacKay quickly made a lot of new friends, many in the financial services industry. One night in 1981 over beers at Sunset House, one of his friends suggested he meet a client who was coming in looking to establish a captive insurance company in the Cayman Islands. MacKay told him he wasn’t interested, but the friend persisted that he at least meet the client.
“He said ‘Well you might as well go because you never know when you’ll want a job. You might as well find out who people are.’ So I thought, you know, that actually does make sense. So I went to the interview.”
What was said during the interview still didn’t interest MacKay very much, but he was offered a free trip to New York to learn more. He accepted the offer.
“So they took me up there and it was while I was up there and talked to people that I actually got interested in it.”
The initial concept was to create group captive insurance companies for large New York-based advertising agencies that wanted to mitigate the costs of insurance for things like business interruption and bad debts. Back in the early 1980s, group captives would establish their own banks for tax purposes, something that fell away with new US regulations in the mid-1980s.
“These were very, very large advertising agencies,” MacKay said. “I met some very senior people and in talking to them, I thought, ‘yeah, this is interesting’.”
MacKay left Touche Ross on 30 September, 1981, and the following day he started setting up what is now Global Captive Management. Part of that process involved him moving to New York for four months while the business was going through the approval processes in Cayman.
In February 1982, Global Captive Management got a business licence and MacKay got a work permit to work for the company.
“I got a one-year non-renewable permit,” he said with a laugh. “I appealed it and after 51 weeks, the appeal was approved and I’m still here.”
When he opened the doors of the company, it was just him and a secretary in an office at the then newly opened Transnational House, now known as Grand Pavilion. The fledgling company didn’t have many clients because Global was really set up to manage particular captive insurance companies.
“For the first year, we almost had nothing to do,” said MacKay. “I was actually the expert on Apple Panic. It was a game on our Apple machine and people used to come around and play it. And I had the highest score – ever. There was nothing to do!”
Despite the lack of clients, MacKay learned the captive industry over the next several years. Then in the mid-1980s, a hard insurance market, particularly on products like medical malpractice, made captive insurance companies attractive. Cayman’s captive insurance business, which had been put on the map from the 1970s when Harvard established medical malpractice captive here, was in a prime position to benefit. MacKay said he and the other owners of the company realised they could do more with Global than what they were doing.
“We started growing and we’ve continued to grow,” he said. “Now we’re one of the larger independents.”
Opened in Camana Bay during the summer of 2010, Michael’s Genuine Food & Drink has hit its stride in Cayman. Chef de cuisine Thomas Tennant has embraced a wide range of local ingredients, many of which have made their ways to the menu. He has particularly been a champion of cooking with lionfish, the invasive species that threatens Cayman’s reef ecosystem. On any given day, a guest at Michael’s might find lionfish chowder, lionfish ceviche, a crispy lionfish sandwich, wood roasted lionfish or some other lionfish dish on the menu.
For our lunch, MacKay chooses Crispy Sweet & Spicy Pork Belly with kimchi and crushed peanuts for a starter, while I select the House Smoked Local Wahoo Salad with mixed greens, tomatoes, house-smoked bacon, red onions, capers and, of course, house-smoked wahoo fish.
I’ve had the pork belly before and as far as pork belly goes, Michael’s Genuine serves one of my favourites because it is finished off in a deep fryer, making it denser – and less gelatinous – than most pork belly offerings.
Unique and imaginative – but not pretentious – dishes are something Michael’s Genuine is known for and my smoked wahoo salad is as unique and imaginative as it is delicious. This was a hearty salad that would have been plenty of food for lunch, had I not had more food coming.
After Harvard established here, MacKay said other medical malpractice captives followed because they figured “if Cayman is good enough for Harvard, it’s good enough for us”.
Harvard established in Cayman even before the Insurance Law was enacted in 1980. MacKay said John Darwood and Steve Butterworth, the head and deputy head of Cayman’s first insurance regulatory body, were key to Cayman’s growth in captive insurance.
“Those two experienced gentlemen, in particular, was what really brought the captive industry up here because they got a lot of respect, they brought the laws in and made sure we all complied,” MacKay said, noting that some captive managers at the time chose to leave after regulation came.
MacKay has been here long enough to remember the days when not all sectors of Cayman’s financial services industry were well regulated and some of the money coming to the Island wasn’t clean.
“Back in the old days it was very much the Wild West,” he said. “There were things going on that you looked at and said, ‘I don’t believe this’.”
However, from his earliest days in the captive industry, he found it well regulated.
“We’ve all heard the stories – you couldn’t find a [bank] teller because they were all in the back counting wads of money,” he said. “The insurance industry has never been in that business. I’d be naïve to say that every dollar that’s ever gone through an insurance company down here has been pure, but… because we get a lot of not-for-profits and [businesses] like that and most of them file [US] tax returns, the vast majority was never affected by that.”
MacKay said the reasons people formed captive insurance companies in Cayman were different from the reasons that attracted people to the banking industry in the early days.
“Cayman changed dramatically in the banking industry and the trust industry with [regulation] because people were hiding money,” he said. “In insurance, that was never the case. In fact it’s almost the opposite because they wanted the tax deduction up [in the United States] and to get the tax deduction they had to always declare their insurance company down here.”
Upfront and personal
Most of the people who get into captive management are accountants because a lot of the job involves bookkeeping, MacKay said.
“[The captive insurance company has] a broker who’s going to be doing the insurance side of it, the policy issues and everything else,” he said, adding that the captive’s books are done and kept in Cayman. “So if you really want to put it in its basic terms, we’re glorified bookkeepers. Now, we’re a little bit more than that. A lot of our clients don’t understand insurance… so we’re giving a lot of advice. Certainly our clients rely quite heavily on us, some more than others, which is not always a good thing because I prefer them to be fully understanding. Our job is to try and educate them so they understand why they’re making decisions. But you’ve got some physician groups that as long as they’re paying less [for insurance], they don’t care. And you’ve got some that are very sophisticated.”
Because captive insurance companies are required by the Insurance Law to hold regular board meetings, including some in the Cayman Islands, MacKay sees his clients often. Some of them have been his clients since the 1980s.
“Most of my clients have become friends over the years,” he said.
Unlike many of Cayman’s other financial services sectors, the captive insurance industry attracts a lot of stay-over tourism because of the required board meetings. MacKay said one of his group captives comes to Cayman every year for a meeting on the first Monday in May and that with the whole group and their families, it is more than 120 people.
“We missed one year – 2005, after [Hurricane] Ivan. We couldn’t find anywhere to stay, so we had it in Bahamas,” he said. “People were not happy – they wanted to be in Cayman.”
MacKay said that some of his captive clients might only come in one day for a board meeting and then leave the next day, but others come for longer, sometimes with their families.
“The one good thing about insurance companies is… they do come here,” he said. “They do spend money. They do have dinners. There is money spent. It’s one of the very few parts of the financial industry that actually does [bring visitors] in any substantial amount. Then there’s our conference. We had 1,200 people there last year.”
This year’s Insurance Managers Association of Cayman conference, which was just held the last week of November, brought another 1,200 people to Grand Cayman. MacKay said the only thing preventing even more people from coming is the lack of available conference facilities and hotel rooms to accommodate all the people who want to come.
Second course, of course
Michael’s Genuine Food & Drink is not a fancy restaurant, but a bistro that serves good food and good drinks, including the largest selection of craft beers in the Cayman Islands.
Owner Michael Schwartz likes to say that the secret of good food is good food, which means if you start with good ingredients, good things will end up on the plate. And at Michael’s Genuine, what’s on the plate is usually very good, whether it’s a Niman Ranch Black Angus burger, a pulled pork sandwich, a pizza or a homemade pastrami sandwich.
The atmosphere inside Michael’s Genuine is contemporary and casual, with a main dining room, a bar area and a secondary dining area off the kitchen, which is great for groups up to 28 people.
Outside, Michael’s offers patio dining on the Camana Bay Crescent cooled by the breezes coming in off the North South.
As locals dressed in business attire, we naturally chose the air conditioned comfort of inside for our lunch.
For a main course, I ordered Michael’s Genuine’s falafel wrap, which was served with homemade flat bread, hummus, tabouli, tomato, cucumber and tahini sauce, the falafel wrap is a salad and sandwich all rolled – literally – into one. The wrap comes with a side order of sweet potato fries, so it was really plenty of food.
MacKay was right there with me, having chosen the Pan Roasted “Poulet Rouge” Chicken – a half chicken – with wood roasted okra and a small baby arugula salad.
MacKay said he hasn’t worn a tie since he left Touche Ross in 1981.
“First thing I did when I set up on my own company – no tie,” he said. “In fact, when clients come in and they’re wearing a tie and a jacket, I’ll say ‘Awww, I’m really sorry, when’s the funeral?’ They’ll look at me. ‘What do you mean?’ they’ll say. “Well, you’re wearing a jacket and tie, there must be a funeral.”
None of the men in MacKay’s office wear a tie to work.
“Sometimes when people come to interviews, they will wear a tie,” he said. “They want to impress you, but that doesn’t impress me.”
But just because MacKay has a casual dress code for his office, doesn’t mean he’s a complete softy.
“I’m accused of being sort of a harsh interviewer,” he said. “What I do is… I’ll throw a question from left field. I try to disrupt them because I want to see how they’ll respond. And people call that mean or harsh, but you’re going to get that from a client, so I really want to see how you’ll respond under a little bit under pressure. You can look good all you want, that doesn’t mean anything. The best crooks in the world are the best-dressed people. I want to see how you’ll respond, what your thought processes are and things like that.”
Global Captive Management has as a staff of 17 people, down from 20 before the global recession. MacKay said the company has done reasonably well with its hires, although he’s had to fire some people.
“But most of our staff tend to stay a long time,” he said.
No visit to Michael’s Genuine is complete without dessert, I don’t care how full you are. With a dessert menu fashioned by James Beard award-winning pastry chef Hedy Goldsmith, who is the executive pastry chef for all of Michael Schwartz’s restaurants, and executed by Pastry Chef Adriana Duran, a sweets course at Michael’s Genuine is really compulsory.
MacKay ordered the sorbet, which seems ordinary enough, except that it was homemade sparkling green apple sorbet.
I went for the homemade Banana Split Cream Pie in a Jar.
Although the flavour changes daily, the ‘Pie in a Jar’ is always on the menu and is literally the ingredients of a pie, without the crust, placed in a small Mason jar. MacKay was amazed when he saw it.
We were also served some various cookies, candies and confections, one of the fun touches that makes a meal at Michael’s Genuine memorable.
Because only some of the board meetings of the captive insurance companies he manages are held on island, MacKay has to travel a lot, as do most captive insurance managers.
He usually flies more than 100,000 miles are year and he has flown over 100 flying legs during three years in the past. By the beginning of November this year, he was already at 95,000 miles, so he’ll get to 100,000 miles again in 2012, a milestone that pays big frequent flyer dividends.
“One year, I went to Japan, just to get over 100,000 miles,” he said, adding that he had no business reason to go there. He chose Japan simply because the round trip flights from Cayman would give him the amount of miles he needed to reach 100,000.
“Everybody said I was crazy; I was only there for a day, but it meant I got all my upgrades for free, so I actually saved money. As the old saying is, sometimes you have to spend money to make money.”
MacKay said he’s hardly ever home in Cayman for an entire month.
Over the years, MacKay has become adept at packing and he only takes carry-on luggage. One thing he can’t do is sleep on an aeroplane, so he reads a lot and on long trips, watches movies. He admits he gets tired of travelling sometimes, but said he generally likes to travel. And at 58 years old, he has no plans on stopping in the near future.
Rugby might have been the deal maker or breaker when he moved to Cayman, but since he has been here, MacKay has learned to love two North American sports, gridiron football and ice hockey.
He became a fan of football in 1986, when a friend of a friend invited him to Florida to watch a Miami Hurricanes college game on Saturday and then a Miami Dolphins professional game the following day. The Hurricanes game was against Oklahoma and was hyped as the ‘Game of the Century’ because it pitted the No. 1 team in the nation – Oklahoma – against the No. 2 team – Miami – and featured some of the biggest stars in college football at the time. “The atmosphere was incredible,” MacKay said, noting that he didn’t get the same feeling at the Dolphins game the next day.
He also has become a big hockey fan. MacKay’s wife Sara is from Buffalo, New York, which has had a National Hockey League team called the Buffalo Sabres since 1970. MacKay said he learned about hockey through his father-in-law.
MacKay said he actually loves most sports, and he spends a lot of time golfing. But the sport he’s had the most impact in Cayman is swimming.
He served on the Board of Directors of the Cayman Islands Amateur Swimming Association for many years, first as a member, then as treasurer for six years then as president from 2006 through 2009. Earlier this year, he became president once again.
MacKay is also the father of Andrew, who became the first Caymanian swimmer to qualify for the Olympics in 2003 and later competed in the Games in Athens in 2004, before going on to college and swimming for The University of Notre Dame.
It’s now been some nine years since his son swam competitively here in Cayman, but MacKay is still involved.
“I’ve always believed in giving back,” he said. “We’ve been very fortunate here.”
Getting involved in the community was something MacKay did from the early years after his arrival in Cayman. He joined the Lions Club in 1982 and was active until 1991, serving as secretary and Leo advisor along the way. Although he had to become inactive in the club because of his extensive travel schedule, MacKay said he still supports the Lions Club where he can.
Global Captive Management felt the pinch of the financial crisis like everyone else in Cayman’s financial services industry, but 2012 has been somewhat of a turn-around year and things are looking better, MacKay said.
But there are a couple of potential challenges on the horizon.
“Certainly what the US government does, what the Foreign Accounts Tax Compliance Act does, can become an issue,” he said. “We can work around some of those things, depending on how they implement it because no one knows what the final implementation is going to be.”
MacKay said everyone wants to comply with whatever US government rules are in place.
“As I always say to people, paying tax isn’t the worst thing in the world – you probably made some money,” he said. “We try to make sure our clients comply with whatever needs to be done. So as long as it’s not something that’s too onerous to them and forces them to basically leave, we’ll probably get around it. But it’s going to be more complicated.”
Another potential challenge comes from within the country, particularly with the constant increasing of financial industry fees.
“There are quite a few [local businesses] who now use back offices elsewhere,” MacKay said. “Those are jobs that were down here. And the more the costs go up on the financial sector, the more jobs can go. The problem is that the big multi-nationals like Marsh and Aon, they all have back offices elsewhere; it’s easy for them. But for a small Caymanian businessman like myself, what am I going to do? At some stage to be competitive, I’m going to have to think about doing the same thing. Nova Scotia keeps pushing – ‘We’d love to have you here, we’ll give you tax breaks and everything else’. You can only squeeze us so much because we’re competing against everyone else and if they can undercut me because they got their staff in India or somewhere else… then how do you compete? I think government has forgotten that part of it.”
In addition, the clients – those who form the captive insurance companies – have to feel being in Cayman makes sense financially.
“It’s a global market,” he said. “The fees we’re paying have to match or be something similar to what you can get elsewhere.”
Not only are the Cayman Islands facing competition in the captive insurance sector from other offshore jurisdictions, it’s now facing stiff competition from onshore, MacKay said, noting that some 37 American states now have captive insurance laws. While some of those states aren’t really competition, others, particularly Vermont, are.
“What the government needs to understand is people don’t come to Cayman because it’s the nicest place,” he said. “Maybe in the old days, but we’ve got crime like everyone else now. It’s a highly expensive place to live. So there’s got to be a reason. But more than that, is there a reason for us, the employers, to bring people to Cayman.”
Then there’s Cayman’s perception problem. A lot of US not-for-profit entities with captive insurance companies are under fire for being in Cayman and for having meetings/vacations here. MacKay said he lost a captive insurance company for that reason this year.
“The fact is they’re making a lot of money down here because they’re controlling their costs, they’re controlling the risk and [earning] investment income,” MacKay said. “All they’re doing is meeting down in Cayman once, maybe twice a year – it’s really not a lot of money in the scheme of things when you look at it. So they understand why they do it down here, but there’s also a perception issue. You’ve got to be careful how you do it. You can’t just say, ‘I’ll come to the Cayman Islands’. But certainly, for a not-for-profit, there are many reasons why a not-for-profit should be in the Cayman Islands and not in the US.”