Cruising ahead: the Cayman advantage

What opportunities do you see for your company for the next 12 months?

Cayman remains an attractive place to do business, and we expect to continue to see the effect of the hard market in increased captive formations and existing companies expanding their coverages being written, while those writing third party risks and operating via the use of cell companies will also continue to grow.

In addition, we expect to see an increasing number of open market reinsurers that are attracted to Cayman with a subsequent increase in self-managed class B(iii) and class D companies. The ability of managers such as WTW being engaged to help facilitate the entry into the market and providing ongoing back-office services is exciting.

What is the attraction of domiciling in Cayman?

Cayman remains a very competitive and attractive domicile for a number of reasons. Cayman’s solvency regime does not follow Solvency II nor have NAIC equivalence, but sophisticated and larger licensees are able to follow their own internal capital model if approved by the Cayman Islands Monetary Authority (CIMA). This is a major plus for larger carriers and particularly those in the life and annuity space who for good reason may not wish to comply with a prescriptive capital model.

However, as Cayman is home to many captives, the existing capital and solvency regime for single parent captives or those writing limited third party business remains competitive, proportionate, and easy to follow in comparison to some other domiciles.

As a mature domicile, Cayman is home to 668 captives (3Q 2022) along with a similar number of cells, meaning Cayman is home to close to 1,500 risk-taking entities. This means the infrastructure and professional services sector is built to accommodate any risk-bearing entity.

There really isn’t anything Cayman hasn’t seen. As managers we work closely with CIMA who are always willing to meet prospective licensees to discuss business proposals and to meet clients to discuss their future plans, making the domicile’s approach a true partnership to delivering success.

What regulatory changes would you like to see in Cayman?

To remain competitive, it’s important to develop regulations that support the industry. If anything can be done to further streamline business plan changes and new licence applications, this would be helpful. The managers would need to ensure what’s being submitted is easily understood to assist the regulator. Perhaps something like the existing class C special purpose vehicle fast track application process may work, if suitable parameters can be agreed.

This could be extended to include the formation of new segregated portfolios or portfolio insurance companies. An industry task force is in the process of being formed to discuss segregated portfolio companies, so hopefully some meaningful recommendations and changes will come from this.

Is there still growth potential in the sector?

The captive insurance industry has been operating for more than 60 years and remains resilient. This has largely been because of innovation in the sector and the insurance cycle itself that results in a cyclical hard market that has forced many insureds to look for solutions. As new risks emerge the captive sector is often able to move faster than the commercial sector by including risks that perhaps aren’t available in the market or that remain expensive or problematic.

More recently property, cyber, D&O, employee benefits, telemedicine and even climate risks are being written by captives, so the future for captives remains strong.

Do you think the hard market will continue?

Yes. It looks as if the hard market will continue for some time, this is assuming catastrophe losses continue to be experienced based on climate change. It appears from predictions that storms and other weather-related events will be stronger and more frequent and that will only add to reinsurance pricing pressures.

There may be individual lines that are more resilient, such as workers’ compensation, but insurers and reinsurers will ultimately want a fair price for the ever-increasing risks.

What changes would you like to see in the sector?

One area that has seen growth over the last few years is compliance, which is making it much harder and more expensive to operate in the offshore sector; in many respects, there doesn’t appear to be a level playing field in comparison to many onshore domiciles. Over time I think this needs to change to protect the overall captives industry.

It would also be very useful if technological advances could coordinate the whole know-your-customer process on a multijurisdictional basis, so if for example a director is approved in Cayman s/he can also be approved in Vermont by using some type of central database.

What do you see as the main challenges for Cayman in the year ahead?

One of the main areas for Cayman in general is to be removed from the Financial Action Task Force’s (FATF) Grey List. In October it was acknowledged by the FATF that Cayman continues to strengthen its anti-money laundering (AML) regime by “imposing adequate and effective sanctions for parties who fail to file accurate, adequate and up-to-date beneficial ownership information”, thus satisfying the recommended action with respect to Immediate Outcome 5 (arrangements that prevent money laundering or the financing of terrorism).

Cayman Finance at the time said it “remains optimistic that the ongoing efforts by our authorities to investigate and prosecute money laundering offences in the jurisdiction will lead to our removal from the list in due course”.

The last point to be satisfied with the FATF relates to AML prosecutions. There are a number of cases in the Cayman courts currently; once concluded that should satisfy this last action point.

Regulatory changes always take some time to implement, so it’s essential the industry and CIMA continue to work collaboratively together in the consultation process so that managers can set client expectations and assist with their implementation.

Other than the above and as stated earlier Cayman needs to remain competitive and therefore needs to be proactive to explain to any detractors why Cayman remains a key place to do business globally.

As an award-winner, what would you say are the secrets to your success?

Listening to clients and understanding their needs is crucial. It’s important to deliver an on-time and accurate work product, while at the same time providing guidance when needed for clients by adding value and bringing good ideas to the table. Last, you should remain open, approachable, and above all honest and of course try and have some fun along the way.

At WTW, no matter whether you work with one or multiple parts of our service offerings, we remain committed to providing the best service to our clients.

What advice would you give to the next generation of talent in your sector?

Learn to love insurance—it really isn’t boring. After 23 years, I love the fact that there are always new challenges to meet. This industry can take you to places you would never have dreamed, and give you the opportunity to make friends for life during a rewarding and fulfilling career.

Find yourself a good mentor to help you on your journey—for the younger generation it’s not all about emails. Learn to pick up the phone, speak to people and don’t forget to turn your webcam on!