The Cayman Islands is already an attractive captive domicile, not forgetting its beautiful beaches and high-end tourism. The only thing that was missing it would seem was a permanent head of insurance supervision at the Cayman Islands Monetary Authority (CIMA).
The Cayman Islands is already an attractive captive domicile, not forgetting its beautiful beaches and high-end tourism. The only thing that was missing it would seem was a permanent head of insurance supervision at the Cayman Islands Monetary Authority (CIMA).
Ruwan Jayasekera filled the vacancy when he was appointed to the role in July, having held it in a temporary capacity since March. Jayasekera took over from Morag Nicol, who had served as acting head since April 2014 following the departure of CIMA’s last permanent insurance supervision leader, Gordon Rowell.
Jayasekera says: “My primary objective is to continue to follow CIMA’s regulatory philosophy, and as a team, continue to remain responsive, pragmatic and accessible to our licensees.”
One of the competitive advantages of the domicile has is its regulatory regime, according to Jayasekera. He says: “Not many regulators in the world are easily accessible the way our licensees access CIMA.”
He also reveals that another objective of his was to integrate the experiences and expertise of the team to “further enhance” the effectiveness and efficiency of CIMA’s supervision.
He says: “I am pleased to report that the progress has been successful thus far.”
Mark Kay, senior vice president of operations at Atlas Cayman, is equally positive. He comments: “Jayasekera has had a very positive impact and I believe [he is] welcomed across the board by the industry.”
CIMA’s installation of Jayasekera as the permanent head of insurance supervision coincides with a surge in captive industry growth in Cayman.
As of 30 September this year, Cayman had added 33 new insurer licensees during 2016, reflecting a 33 percent increase over the 22 licences issued during the same period in 2015.
Of the 33 new additions, 28 were new class B insurers, four represented class C insurers and one was a class D insurer.
During Q3 2016, 10 new class B insurer licences were issued in the Cayman international insurance market and as a result, the total number of insurer licensees increased to 711. Of that number, 361 represented pure captives and 146 accounted for segregated portfolio companies.
Jayasekera says: “Based on the number of applications which CIMA has approved in principle (applicant is in the process of meeting requirements to obtain the licence) and considering discussions with the insurance managers and potential licensees, the authority expects at least 10 to 15 new formations by the end of 2016.”
He adds: “Historically, the last quarter of each year, especially the months of November and December, has always seen heightened activity in Cayman-domiciled insurer formations. If the same trend continues, indications suggest that the Cayman Islands will see a tremendous growth in new company formations in 2016.”
The Insurance Managers Association of Cayman (IMAC) recently revealed that, as of 30 September, total premiums written for the sector were $13.9 billion, with total assets held reaching $59 billion.
Kieran O’Mahony, chair of IMAC, comments: “The acceleration in the number of new captive formations over recent years is evidence of the continued strength of our industry and the attractiveness of Cayman as the captive domicile of choice.”
“What is even more remarkable is the fact that our segregated portfolio companies, and our group captives, for which we are also the leading domicile, are seeing steady organic growth (as well as new incorporations) both tend to suppress new captive formation numbers.”
O’Mahony adds: “We are not a quantity-driven domicile, rather for us in Cayman quality is key. Yes, being able to combine both of those elements, in the face of difficult market trading conditions, is especially satisfying.”
In terms of total figures, healthcare still leads the way in Cayman. IMAC notes that Cayman is the leading jurisdiction for medical professional liability captives, with 34 percent of captives operating in that category.
The results from IMAC also showed an increase in workers’ compensation captives. Samuel Banks, counsel and a member of the corporate department at Appleby, says that it is the second largest group, with approximately 21 percent of captives assuming this risk in Cayman.
Simon Raftopoulos, partner and a member of the corporate department at Appleby, suggests that Cayman captives are also increasingly being used more innovatively, including for employee medical stop-loss, equipment maintenance and unrelated party risks, as well as cyber and privacy breaches.
Innovative flexibility
The recently enacted portfolio insurance company (PIC) legislation in Cayman now allows for standalone corporate entities to be wholly-owned by individual cells within a segregated portfolio company.
According to Raftopoulos: “This innovation provides for greater flexibility in corporate governance and further ringfencing capabilities to segregate assets and liabilities from other segregated portfolios.”
Banks adds: “Additionally, because PICs have separate corporate existence and identity, it is now possible for PICs owned by individual cells of a segregated portfolio company, for example, a rent-a-captive structure, to contract on an inter-cell basis.”
Taking advantage of this structure is insurance manager Atlas Cayman. Kay says the company is currently looking at making use of the PIC legislation outside of the traditional healthcare marketplace, such as in medical stop-loss, workers’ compensation and general property and casualty.
Although Cayman has seen year-on-year growth, in a competitive market it is important to be able to sustain that growth by attracting new business and keeping existing business interested. Jayasekera explains that despite the competitive market, Cayman is “more than capable” in maintaining its position as a “leading captive insurance domicile”.
The head of insurance supervision notes that CIMA will “continue to do its part to ensure that the jurisdiction remains attractive to quality business, for both existing and potential licensees”.
Jayasekera explains that this will be done by ensuring captive regulatory framework remains “modern, flexible and yet robust enough to keep the pace of the dynamic insurance industry”.
He notes that CIMA will also continue to “strive to meet the international best practices and standards to suit our market while encouraging innovation and sophistication” to help maintain the domicile’s reputation.
Looking ahead, Jayasekera suggests that one development in the Cayman captive market will be the shift/trend in new captive insurance and reinsurance company formations, as more companies are formed to assume unrelated and non-traditional risks.
He says that changes made to the insurance law, supporting regulations and the regulatory framework to accommodate sophistication and innovation, have had a “positive impact” on the insurance industry. He also expresses excitement about the new opportunities that the healthcare sector of the US presents to captive insurers in terms of volume and non-traditional risks.
Throughout 2017, CIMA “will continue to engage with the captive reinsurance and insurance industry, and other stakeholders, through collaboration, dialogue and engagement to identify areas where greater efficiency, flexibility and innovation are necessary for the Cayman Islands to remain a leading world-class jurisdiction”.
