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Evolution – How Cayman Is Transforming Itself into an International Insurance & Reinsurance Jurisdiction

Offshore domiciles like the Cayman Islands maintain their edge by creating new solutions and offering key advantages that others can't match.
By: | March 20, 2017 • 4 min read

Today’s captive landscape looks very different than it did a decade ago. Likewise, Cayman has been undergoing a transformation, and doubtless will continue to see change over the next decade to come.

Healthcare has been one of the cornerstones upon which Cayman built its captive business. However, the last few years have seen growth in international insurance and reinsurance, particularly around commercial reinsurers looking to establish themselves within the Cayman Islands with the goal of writing life and annuity, pension and long-tail liability coverage.  Some of the business from the commercial reinsurance market has been coming from markets such as Asia and Latin America, as well as the U.S.

It is a natural diversification from a consolidating healthcare market for Cayman to explore commercial reinsurers, Class D’s and Class B3s as future growth areas for the jurisdiction. A lot of these new carriers have an international reach beyond one specific market.

To make these changes it takes a collaborative model for regulators and legislators to stay in tune with the needs of the captive industry. Cayman is particularly fortunate to have a commercially savvy regulator interacting regularly with the Insurance Managers Association of Cayman (IMAC) to ensure a consistent approach to such business.

Regulators, lawyers, insurance managers, accountants, finance, and all members of Cayman’s established infrastructure work together. CIMA, for example, meets with IMAC on a quarterly basis to discuss opportunities for innovation allied to the operational day-to-day requirements of either party.

That is how the need to expedite ILS and CAT bond licensing approvals was identified. CIMA recently announced accelerated approvals for these licenses.

“We’ve moved beyond the traditional administrative approach for captives and adopted a more consultative approach with our clients,” said Adrian Lynch, of the Insurance Managers Association. “We operate as a very cohesive unit. When we have fluidity between regulators, the commercial environment and third party service providers, the jurisdiction can move inexorably forward.”

Cayman’s 40 years of experience in the captive space forms the foundation of its offering model and value proposition. Cayman providers can act as trusted advisers for clients.

That experience and expertise continues to evolve in what is an ever competitive and expanding captive industry.

Future Growth

Adrian Lynch, Insurance Managers Association of Cayman

Onshore domiciles have developed in the in the U.S., presenting a challenge to the more established international strongholds such as Cayman. But competition drives innovation and diversification.

In the last two to three years, Cayman has seen significant consolidation within the healthcare space among larger hospital systems resulting from Affordable Care Act in the US.  It will be interesting to see what emerges as an alternative to the ACA and its impact on the industry.

Cayman’s aim at diversification has required the jurisdiction to adjust its own value proposition. Captive managers who have built up healthcare-specific expertise, for example, are now also looking to invest in areas such as underwriting, actuarial, and business development.

Another challenge that some onshore jurisdictions face is that, although they have active captive legislation, they may lack strong surrounding infrastructure.

Cayman holds a uniquely advantageous position as it essentially has a 40-year head-start on most U.S. jurisdictions. Cayman’s deep skill base compares favourably to some of the other top-drawer jurisdictions in terms of their ability to meet all the needs of any new captives or insurance or reinsurance companies being established.

“CIMA has been working with local service providers for so long that it has become a true partnership between government and stakeholders,” Derek Stenson of Walkers added.

All insurance management leadership is looking at their insurance market and trying to ensure they can compete, continue to grow and meet the requirements of their stakeholders. It is a natural evolution for any jurisdiction such as Cayman to look 5 to 10 years down the line at its sources of business.

Cayman has been a world leader in innovation and alternative risk thought leadership, from establishing the Harvard Captive, to being the original point of embarkation for ACE & Excel, through to the original ILS structures.

As the world’s largest hedge fund jurisdiction by registered funds, Cayman has a solid platform for growth fuelled by collaboration of all stakeholders.

We are all in essence renting the world from the future generation, and it is indeed our responsibility to ensure a future for the next generation of insurance and reinsurance executives.  Cayman takes that responsibility very seriously.

To learn more about the Cayman Islands’ captive infrastructure, visit http://www.imac.ky/.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with IMAC. The editorial staff of Risk & Insurance had no role in its preparation.




Insurance Managers Association of Cayman (IMAC) is a non-profit organisation run by the insurance managers of the Cayman Islands. In operation since 1981, IMAC’s aim is to act as both regulatory liaison with the Cayman Islands Government and to promote the Cayman Islands as a domicile of choice for captive insurance companies. IMAC hosts the world’s largest captive insurance centric conference, attracting approximately 1,500 clients, directors and officers of captives, service providers and captive managers annually. For more information on IMAC visit www.caymancaptive.ky.

2017 RIMS

RIMS Conference Opens in Birthplace of Insurance in US

Carriers continue their vital role of helping insureds mitigate risks and promote safety.
By: | April 21, 2017 • 4 min read

As RIMS begins its annual conference in Philadelphia, it’s worth remembering that the City of Brotherly Love is not just the birthplace of liberty, but it is the birthplace of insurance in the United States as well.

In 1751, Benjamin Franklin and members of Philadelphia’s first volunteer fire brigade conceived of an insurance company, eventually named The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire.

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For the first time in America — but certainly not for the last time – insurers became instrumental in protecting businesses by requiring safety inspections before agreeing to issue policies.

“That included fire brigades and the knowledge that a brick house was less susceptible to fire than a wood house,” said Martin Frappolli, director of knowledge resources at The Institutes.

It also included good hygiene habits, such as not placing oily rags next to a furnace and having a trap door to the roof to help the fire brigade fight roof and chimney blazes.

Businesses with high risk of fire, such as apothecary shops and brewers, were either denied policies or insured at significantly higher rates, according to the Independence Hall Association.

Robert Hartwig, co-director, Center of Risk and Uncertainty Management at the Darla Moore School of Business, University of South Carolina

Before that, fire was generally “not considered an insurable risk because it was so common and so destructive,” Frappolli said.

“Over the years, we have developed a lot of really good hygiene habits regarding the risk of fire and a lot of those were prompted by the insurance considerations,” he said. “There are parallels in a lot of other areas.”

Insurance companies were instrumental in the creation of Underwriters Laboratories (UL), which helps create standards for electrical devices, and the Insurance Institute for Highway Safety, which works to improve the safety of vehicles and highways, said Robert Hartwig, co-director, Center of Risk and Uncertainty Management at the Darla Moore School of Business at the University of South Carolina and former president of the Insurance Information Institute.

Insurers have also been active through the years in strengthening building codes and promoting wiser land use and zoning rules, he said.

When shipping was the predominant mode of commercial transport, insurers were active in ports, making sure vessels were seaworthy, captains were experienced and cargoes were stored safety, particularly since it was the common, but hazardous, practice to transport oil in barrels, Hartwig said.

Some underwriters refused to insure ships that carried oil, he said.

When commercial enterprises engaged in hazardous activities and were charged more for insurance, “insurers were sending a message about risk,” he said.

In the industrial area, the common risk of boiler and machinery explosions led insurers to insist on inspections. “The idea was to prevent an accident from occurring,” Hartwig said. Insurers of the day – and some like FM Global and Hartford Steam Boiler continue to exist today — “took a very active and early role in prevention and risk management.”

Whenever insurance gets involved in business, the emphasis on safety, loss control and risk mitigation takes on a higher priority, Frappolli said.

“It’s a really good example of how consideration for insurance has driven the nature of what needs to be insured and leads to better and safer habits,” he said.

Workers’ compensation insurance prompted the same response, he said. When workers’ compensation laws were passed in the early 1900s, employee injuries were frequent and costly, especially in factories and for other physical types of work.

Because insurers wanted to reduce losses and employers wanted reduced insurance premiums, safety procedures were introduced.

“Employers knew insurance would cost a lot more if they didn’t do the things necessary to reduce employee injury,” Frappolli said.

Martin J. Frappolli, senior director of knowledge resources, The Institutes

Cyber risk, he said, is another example where insurance companies are helping employers reduce their risk of loss by increasing cyber hygiene.

Cyber risk is immature now, Frappolli said, but it’s similar in some ways to boiler and machinery explosions. “That was once horribly damaging, unpredictable and expensive,” he said. “With prompting from risk management and insurance, people were educated about it and learned how to mitigate that risk.

“Insurance is just one tool in the toolbox. A true risk manager appreciates and cares about mitigating the risk and not just securing a lower insurance rate.

“Someone looking at managing risk for the long term will take a longer view, and as a byproduct, that will lead to lower insurance rates.”

Whenever technology has evolved, Hartwig said, insurance has been instrumental in increasing safety, whether it was when railroads eclipsed sailing ships for commerce, or when trucking and aviation took precedence.

The risks of terrorism and cyber attacks have led insurance companies and brokers to partner with outside companies with expertise in prevention and reduction of potential losses, he said. That knowledge is transmitted to insureds, who are provided insurance coverage that results in financial resources even when the risk management methods fail to prevent a cyber attack.

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This year’s RIMS Conference in Philadelphia shares with risk managers much of the knowledge that has been developed on so many critical exposures. Interestingly enough, the opening reception is at The Franklin Institute, which celebrates some of Ben Franklin’s innovations.

But in-depth sessions on a variety of industry sectors as well as presentations on emerging risks, cyber risk management, risk finance, technology and claims management, as well as other issues of concern help risk managers prepare their organizations to face continuing disruption, and take advantage of successful mitigation techniques.

“This is just the next iteration of the insurance world,” Hartwig said. “The insurance industry constantly reinvents itself. It is always on the cutting edge of insuring new and different risks and that will never change.” &

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]