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2017 Cayman Captive Forum Updates from CICR Editor Mike Mead

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December 07, 2017

Editor's note: Captive Insurance Company Reports (CICR) editor Mike Mead attended the Annual Cayman Captive Forum and reported back to on the event.  Here is what he had to say.

The 25th Annual Cayman Captive Forum was successfully held last week at the Ritz Carlton in Grand Cayman. Over 1,400 were registered, with many more in attendance. The program held several interesting discussions, with updates from the government on captive regulations and international compliance, as well as updates on captive formations.

Regulations and Compliance

One major reason for the difference between Cayman and US captive domiciles is that Cayman regulators are called to observe more laws and regulations—not only those of the Cayman Islands, but also of the United Kingdom, European Union, International Association of Insurance Supervisors (IAIS), and others.

Many of these regulations apply to US domiciles, but as states, they don't normally engage in international activities. Those matters are dealt with by the federal government. In Cayman, they are dealt with directly by the Cayman regulators.

Not only must they balance all the regulations, they also must determine their effect upon the financial/captive industry and not seriously impede any worthy financial business. This takes time and knowledgeable, sophisticated staff.

When the IAIS demands something, it must be evaluated against UK and Cayman regulations and practices, and the needs/wants of the affected industry.

This situation often results in the publication of so-called standards of governance. These standards are not necessarily laws, but rather point to laws that might affect a particular transaction. A violation of a standard usually calls into play a meeting or discussion with the regulator where the many niceties are laid out. Compliance is expected, if not legally required.

During the conference, the point was made that Cayman does not comply with Solvency II regulations, as they are too restrictive for Cayman's best clients—US companies.

Captive Formations

New captive formations in Cayman are exceeding most previous years with no slow-up in sight, and Latin American countries are becoming very active.

Ruwan Jayasekera, head of the insurance division at the Cayman Islands Monetary Authority, announced that Cayman now has 705 licensed entities and that they are number one in medical, financial, and group captives. In total, the division has issued 999 reinsurance licenses.

Mr. Jayasekera also reported that large hedge funds are still prominent in Cayman, as investment holdings and as captive owners doing reinsurance. It is felt that this is due to funds being widely available. Financial reinsurance is focused on financial management and longevity risk.

He also shared that annuities are becoming a bigger trend. There are currently 840 licensees of annuities with 130 reinsuring third-party business.

Mr. Mead will report more on the conference in the upcoming January and February issues of CICR.

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