Foreword
A collective approach
A shared desire by all local stakeholders to see captives prosper and grow is at the heart of Cayman’s strength in this space, says The Hon. Tara Rivers, JP, MLA, Minister for Financial Services and Home Affairs.
In an uncertain world, marked by an unprecedented pandemic, one of the assurances that still exists is that the Cayman Islands remains a leading international financial centre. We pride ourselves on having a strong regulatory and legislative framework that attracts sound business. All areas of Cayman’s financial services industry benefit from this fact, including the captive insurance sector.
A shared desire by all local stakeholders—including government, the Cayman Islands Monetary Authority (CIMA), and industry practitioners—to see captives prosper and grow is at the heart of Cayman’s strength in this space. A huge boost to Cayman’s position comes from the stellar efforts of the Insurance Managers Association of the Cayman Islands (IMAC), as they contribute to the positive role captive insurance plays in our jurisdiction’s reputation, and highlight the work of our captive professionals.
Considering the worldwide impact of COVID-19, the efforts to attract and maintain captive insurance business in the Cayman Islands have been highly successful. According to the latest CIMA statistics, as of September 30, 2020, there are 652 class B, C, and D captive insurance companies—which is almost the same as the September 2019 figure of 655 captive companies.
Many of the positive trends seen before the pandemic are continuing. Segregated portfolio companies (SPCs), for example, have grown into being the standout company type for captives. Over 21 percent of the 2020 captives formed were SPCs, which equates to more than 600 SPCs. Pure captives, meanwhile, number at 282 companies. These figures compare well to the 2019 totals of 129 SPCs and 289 pure captives on the market.
“Efforts to attract and maintain captive insurance business in the Cayman Islands have been highly successful.”
The Hon. Tara Rivers
During these uncertain times, it’s likely that SPCs have become more attractive due to their flexibility in handling the risks associated with complex corporate structures; and they have been used to house several hundred portfolio insurance companies (PICs).
Another positive sign can be seen in the resilience of the class B space, with little fluctuation in the issuance of class B(iii) licences. There are now 153 licences, which operate as third party reinsurance companies, compared to the 157 class B(iii) licences in 2019.
Government has aided the work of our industry professionals through measures to offset disruptions to their regular operations this year. Extensions were given to all companies to file their annual returns and Economic Substance Notification filings.
Government deferred the payment of annual fees and accepted affidavits and other documents that had been notarised or certified online or utilising audio-video technology.
The result is continued investor confidence in the Cayman Islands, which had previously been established over decades due to our consistent adherence to international standards.
“Another positive sign can be seen in the resilience of the class B space.”
Assessments
As a jurisdiction, most of our focus over the past 36 months or so has been on Cayman’s involvement in external assessments by international regulatory and economic bodies. Among them is the Caribbean Financial Action Task Force (CFATF), which evaluated Cayman’s anti-money laundering, counter-financing of terrorism and counter proliferation financing (AML/CFT/CPF) regime; and the EU and the OECD’s Forum on Harmful Tax Practices, which gave a favourable assessment of our economic substance regime in 2019.
In navigating these assessments, the government recognises that the Cayman Islands—like all international financial centres—will be assessed for compliance with financial services regulatory standards. We consider our cooperation with global assessments to be an important pillar of our responsibility as a leading global financial centre.
Despite the travel restrictions due to the onset of the COVID-19 pandemic, we have used technology-supported diplomacy to progress our efforts in addressing the EU list of non-cooperative jurisdictions for tax purposes, and the CFATF. Importantly, the Cayman Islands was removed from the EU list at the earliest opportunity in October (having been listed earlier in the year); and the government welcomed the decision. This favourable outcome was the result of open and constructive dialogue with the EU decision-makers.
On the CFATF front, Cayman has made notable progress and our AML/CFT/CPF regime is stronger. Our legislation has been significantly enhanced and our regime is already showing signs of improved effectiveness. The way forward rests in the outcome of the review, as the CFATF is expected to report its results in Q1 2021.
As we move forward with these and other matters affecting the financial services industry, government will continue to engage with IMAC. We highly value the input of this sector and place great importance on the role of insurance managers.
Ultimately, in the face of many risks to the structure of global finance, the Cayman Islands is confident in a collective approach to attracting business to these shores. This focus has underpinned the continued success of our financial services industry to date; and government firmly believes that our legislative, regulatory and business models present a future that is bright for captives and the jurisdiction as a whole.
