11-Apr-2014

CAYMAN’S CAPTIVE INSURANCE INDUSTRY CONTINUES TO FLOURISH

The Cayman Islands captive insurance industry is an example of an ambitious, professional and philanthropic industry that has contributed $88.7million to Cayman’s 2013 gross domestic product (GDP) through the services it offers, the people it employs, the visitors it brings to the jurisdiction for meetings and from hosting the Cayman Captive Forum, the world’s largest captive insurance conference, the proceeds of which are used to fund the Insurance Managers Association scholarship fund that serves to educate young Caymanians.

From the 3rd to 5th December Cayman played host to the world’s largest captive insurance conference as close to 1,400 attendees enjoyed unrivalled educational and networking opportunities as industry experts converged on the Ritz Carlton for what was yet another memorable conference, made possible by the many sponsors and speakers willing to contribute to the success of this annual event. 

 

THE CAYMAN CAPTIVE FORUM

 Cayman continues to cement itself as a captive market leader and the Cayman captive industry continues to thrive. With solid, steady growth, surviving competitive market conditions, Cayman has maintained its place as one of the world’s leading captive domiciles. 

There are over 5,000 captives globally and Cayman remains the second largest domicile, in particular via its niche in the health care space. Cayman’s captive insurance industry began significantly in 1976, when the Harvard Medical School chose to place its captive in Cayman, which meant Cayman’s credibility as an offshore domicile was instantly amplified which ultimately paved the way for the development of Cayman as a leading domicile of choice for captives and health care captives in particular.

Health care captives are formed primarily to help manage medical professional liability risk and a large proportion of Cayman-domiciled captives are sponsored by health care entities who use their captives to help reduce the costs of health care to patients. Through this expertise and the important regulatory partnership provided by the Cayman Islands Monetary Authority a constructive business environment has been formed, thus increasing the number of health care captives who formed in Cayman. In addition many other industries writing a variety of lines of business have also found Cayman an ideal place to establish their captives.

With this wealth of knowledge Cayman is the ideal jurisdiction to host the world’s largest captive insurance conference, providing a forum for discussion of the topics most relevant to the industry.

Industry case studies, health care reform, new legislation and tax regulation were hot topics at the 2013 Cayman Captive Forum and an impressive collection of speakers from Cayman and overseas lead and participated in discussions covering industry development and international initiatives with a view of continuing to attract new business and maintain the high standards Cayman is well known for. The Insurance Managers Association of Cayman (IMAC) chairperson Rob Leadbetter led the delegates through the state of the Cayman industry, highlighting not only the issues facing Cayman, but how the jurisdiction has rallied together over the past year to face ongoing changes within the industry. 

“Cayman has continued to lead the way in terms of actively participating and being actively engaged in the development of international regulatory initiatives with a view of continuing to attract and keep the high quality business that is the backbone of our economy.”

Robert Leadbetter – IMAC Chairperson 

New additions to the 2013 Cayman Captive Forum include a full agenda mobile app, which received over 5,400 page views and the launch of Captive Insight, IMAC’s own issues-based magazine.

Cayman based speakers Alan Morris, Paul Scrivener, Damien Pentney and James Trundle offered an insightful outlook on the implementation of the Insurance Law (2010) and an overview on where Cayman stands one year on since the regulations became effective. The Insurance Law and accompanying regulations has modernised the Cayman offering, ensuring that different areas of insurance and reinsurance are all regulated based on the uniqueness of their structures and on their own individual risk profiles, increasing transparency and streamlining processes.

Essentially, the implementation of Portfolio Insurance Company (PIC) legislation allows segregated portfolio companies (SPCs) to incorporate a single cell as a portfolio insurance company, and has opened the door for the development of new alternative risk management structures to domicile in the Cayman Islands.  This structure is modern and forward thinking, taking into account the need for increased corporate governance and greater tax certainty and can easily transition to a stand-alone captive, which works well for incubation purposes. 

On the tax side, FATCA and related tax transparency initiatives were discussed at length, while it was further noted that Cayman has agreed to sign a Model 1 intergovernmental agreement (IGA) with the US in support of its new foreign accounts tax compliance act (FATCA) solidifying the tax authority-to-tax authority information exchange.

“Signing these agreements clearly demonstrates that both Cayman and the US are committed to the stability and growth of global financial services, which contributes to stability in our country’s economies and increased opportunities for our people”

Minister Wayne Panton []

The keynote speaker for this year’s conference was “The Wolf of Wall Street” – Jordan Belfort. Jordan told his wild story of $1 million per week earnings, and his eventual two years in jail for securities fraud.  His story became a best-selling book and a major motion picture staring Leonardo DiCaprio and Matthew McConnaughey, directed by Martin Scorsese. Despite the negative side effect of his antics, Jordan’s message was inspiring.  Recognising the pain caused by his antics and feeling the full scale remorse that goes with it, he told the bursting crowd how he has committed 100% of the royalties from the book and the movie to compensate investors who lost money through his fraudulent schemes. Belfort went on to do what he does best - he empowered and gave useful insights to the attendees on how to create wealth, abundance, and entrepreneurial success – without sacrificing integrity or ethics.

“Success in the absence of ethics and integrity is not success… its failure”

Jordan Belfort – 2013 Cayman Captive Forum.

Forum Co-Chairs Erin Brosnihan & Seamus Tivenan were delighted with their controversial choice of keynote speaker; “We wanted someone who would fill the room with charisma - someone with experience in business and someone with an entertaining story to tell”, said Tivenan.  Brosnihan followed up:  “Jordan’s brutal honesty about his mistakes and his efforts to repay his debts, alongside his obvious entrepreneurial nature, made him an ideal speaker.  With the movie release scheduled around the Captive Forum dates his appearance created quite a “Captive Forum buzz!”

Cayman Islands dignitaries, including Premier Alden McLaughlin, Honourable Ministers Marco Archer, Osbourne Bodden, Kenneth Jefferson and Councillor Winston Connolly were all on hand to congratulate IMAC on the success of the 21st Annual Cayman Captive Forum. IMAC were highly satisfied with Government’s latest contributions and efforts on international regulatory initiatives, and Cayman’s co-operation with those initiatives.

The Cayman Islands has executed 33 Tax Information Exchange Agreements (TIEAs) with sovereign nations.  This endeavour has been recognised by the Organisation for Economic Co-operation and Development (OECD) to be “transparent”, thus cementing Cayman’s importance as an offshore domicile. On the 18th December 2013 The Financial Stability Board (FSB) confirmed Caymans status as a jurisdiction with strong adherence to international regulatory and supervisory standards. The FSB listed Cayman as amongst the countries which meet high standards in banking supervision, securities supervision and insurance supervision. Cayman’s captive industry transparently manages privately held insurance assets, which allow companies to self-insure at rates significantly lowers than those available on the retail market.

 

WHAT THE CAPTIVE INSURANCE INDUSTRY DOES FOR CAYMAN

The captive insurance industry plays a fundamental role in the economy through the ever growing Cayman Captive Forum. With 1,400 registered attendees in 2013 the Forum contributed over $14 million in revenue for the tourism sector taking into account average spends by captive clients (and their families, who often travel with them) for accommodation, food and beverage, transportation and leisure activities.

The Captive Insurance industry in 2013 contributed $88.7million to the Cayman gross domestic product (GDP). By employing more than 400 Cayman residents the captive insurance industry contributes to the economy through real estate, utilities, food and entertainment, government and regulator fees, service provider fees, and tourism, which combine to make a significant contribution to the Cayman economy.

Additionally Government coffers receive payments through the Registrar of Companies Fees (estimated $1.3 million annually) and the Cayman Islands Monetary Authority fees. The estimated GDP contributions from the Cayman Captive Forum and the industry as a whole does not include the multiplier effect of the salaries earned by people employed in these stations.

 

EDUCATING YOUNG CAYMANIANS

The captive industry is notoriously philanthropic. In addition to regular charitable donations made by the captive management companies themselves, the pride and joy of IMAC is their scholarship Fund, which has raised more than US$2 million to date and has sent 24 Caymanian students to complete post-secondary education. This fund allows IMAC to educate at least one young Caymanian per annum. This is the beauty of private enterprise at work. A well-regulated industry that contributes healthily to the jurisdiction in which it operates.

The fund is largely supported through IMAC’s major fundraising event of the year – the Cayman Captive Forum.  Additional contributions are derived from IMAC members, the individual insurance management firms and the captive insurance companies themselves.  It is the intention that the funds available be used where they can provide the most benefit.

Chairman of the Scholarship board, John Pitcairn was grateful for all the scholarship contributions.  “We are aware of the number of well-run and worthy scholarship funds in Cayman that are vying for funds and support. With 24 Caymanian students to complete post-secondary education, we rely extensively on charitable donations and the Captive Forum success.  We are positively influencing so many young lives and we cannot do it alone”.

With 58 applications for one place in 2013, the IMAC Scholarship board conducted 55 interviews in total before selecting the 2013 recipients.  Erica Powell is now studying Early Childhood Education at Florida International University and Tiffany Rankine is studying Forensic Science at the University of Tampa. The main focus is to offer the scholarship to a young bright Caymanian would not otherwise have the opportunity to go to university. During 2010 the Fund achieved charitable status which it is hoped will assist with future fundraising efforts. The financial statements are audited by KPMG.

“I cannot wait to be the teacher who can touch the lives of my students and then I can help my little ones achieve their dreams just as IMAC has helped me achieve mine.”

Erica Powell, 2013 IMAC Scholarship recipient.

The path ahead for Cayman is clear. Maintaining its active role in the shaping of global international regulatory initiatives, its stance on the protection and innovative development of its key markets in North and South America, and the growth of the annual Cayman Captive Forum are instrumental in honing Cayman’s substantial competitive edge.  Captives domiciled in Cayman operate in a credible, well-regulated, and transparent industry of knowledgeable experts and it is only a matter of time before it takes its place as the leading international jurisdiction for captives and reinsurance. 

Cayman Captive Forum

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