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Reflections on the Cayman Islands (Re)insurance Market – a “Virtuous Circle”

Cayman Islands reinsurance

A “virtuous circle” describes a scenario whereby new and existing factors are included and discarded in a continuous system of improvement and self-reinforcement. Such a positive confluence of various factors continue to drive growth in the Cayman Islands insurance and reinsurance market. It’s an exciting time for the jurisdiction, so I’m taking a moment to reflect on the primary drivers of this “virtuous circle” we are experiencing.

What’s fuelling this “virtuous circle”, you ask?

Commercial business

The industry momentum is not simply visible in year-on-year licensee numbers (albeit impressive statistics and available [here] for 2022) but probably even more so in the size, complexity and sophistication of licensees utilising the jurisdiction. A sizeable majority of new licensees are Class B(iii) insurers and reinsurers (as opposed to the traditional Class B(i) pure captive licence), which means some element of third party/commercial business or affiliate reinsurance is proposed. This is resulting in larger carriers being established who are unsurprisingly writing larger programs with more volume and frequency and these transactions are of course materially increasing industry premium and asset values. This means both quantitative and qualitative growth in our local sector;

Industry stakeholders

Among others, all of the major US “insurance” law firms, brokers, actuarial firms and rating agencies are working with and supporting Cayman carriers and adding value to clients by articulating, from their analysis and experiences, how the Cayman Islands might be an option and attractive for sponsors in certain scenarios. These players in our industry are trusted advisors and “gatekeepers” when it comes to domicile selection and their increasing comfort and confidence in Cayman is materially promoting the Cayman product;

Insurance groups

Economic growth

The foundation of the Cayman insurance industry has traditionally been captive insurance, which continues to flourish in Cayman, and the limelight the new reinsurers are getting in no way diminishes this sector but rather, in our view, endorses, supplements and supports it. This is primarily due to the fact that, unlike the varied general corporate applicants establishing traditional Cayman captives, the sponsors of the new breed of reinsurer in Cayman are in most cases institutional insurance or private equity groups with licences in various states and international jurisdictions who have long standing insurance pedigrees and DNA. That these household names are establishing platforms in Cayman drives further interest which drives further growth. Word of mouth is a powerful tool and it’s playing its part in the growth of our industry;

Insurance influencers

As more carriers put senior and well known executives on the ground in Cayman, we invariably get more “champions” for the jurisdiction (“insurance influencers” if you will – one for our younger readers!). These are individuals who have decades of experience and have independently and objectively done their homework on Cayman. These are individuals that are not only happy to burst the bubble of those who casually parrot historical and lazy misguided misconceptions about Cayman but, more importantly, are sufficiently well respected in the industry that when they provide their views others listen. Also powerful stuff;

Onshore familiarity

It’s not just the onshore institutional groups and their service providers that are increasingly familiar and comfortable with Cayman, but also US state insurance departments. As more of their licensees establish Cayman platforms and cede business directly or fronted to Cayman, they interact with and become more familiar with the Cayman Islands Monetary Authority (“CIMA”) and our legal and regulatory infrastructure, and positive experiences of course increases comfort levels.

Growing Local Experience and Expertise

Actuary working on a laptop

Success begets success. The more carriers that establish in Cayman, the more experienced the local service providers become, and the more mandates they win, the more comfortable they are hiring additional staff. As an example, we don’t have the exact statistics, but the number of actuaries living and working in Cayman has exponentially increased over the last five years. So if interested Cayman is hiring, please apply!

Cayman Islands Monetary Authority

A big shout out and thanks to our friends at CIMA and Cayman Islands Government! CIMA continue to be responsive, commercial and timely in adjudicating licence applications and other requests. CIMA attends the regular National Association of Insurance Commissioners (“NAIC”) meetings and, among other things, they have a Memorandum of Understanding (“MOU”) with the NAIC but also a growing number of bi-lateral MOUs with a number of US states which reflects and is indicative of increasing levels of inter-regulator communication, interaction and comfort. Like all regulators globally, CIMA is making enhancements to our regulatory framework which is evolving as our licensees evolve. For example, the recent roll out of new or updated regulatory standards on: (i) corporate governance; (ii) internal controls; (iii) investment activities of insurers; and (iv) licensing of Class D reinsurers have in large part resulted from CIMA reacting and tailoring the regulatory regime to ensure it is fit for purpose for an evolving stable of licensees. Notwithstanding, these are measured developments, fully consulted on with industry and support our growing industry;

Cayman Government

Last but not least…Government support continues to be unwavering. A special thanks in particular to the Honourable André Ebanks, MP, Minister of Financial Services and Commerce who has travelled and attended a host of conferences/meetings/office openings (you name it) and has won a lot of hearts and minds along the way. The industry can’t grow without this support. Furthermore, the fact that per Government’s stewardship the jurisdiction runs a budget surplus, has no discernible debt, record revenue and low unemployment is a testament to the positive work that is done and this is unquestionably taken into account by prospective licensees coming to Cayman.

The above of course is not an exhaustive list. It takes a village to grow a market like this and there is significant and material work being done behind the scenes by all the local stakeholders and industry associations, particularly the Insurance Managers Association of Cayman and the Cayman International Reinsurance Companies Association. The net result being that mixing all of these ingredients together is resulting in quite a popular cocktail… it’s a “virtuous circle” and it’s a dizzying one at the moment.

POSTED WITH PERMISSION. COPYRIGHT CONYERS. Click to read original article.

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