Our literature section is a one stop shop for everything you need to know about regulation, laws, current topical issues and the key people in the Cayman Islands international insurance industry. Here you can browse our articles, brochures and videos to learn more about our industry and understand what sets the Cayman Islands apart from other insurance domiciles.
Information on continuing education can also be found in this section, providing the gateway to both career development and a greater understanding of the issues at the forefront of international discussion.
Additionally, we feature useful links (for news, industry advisories etc) and the most frequently asked questions on all aspects of the international insurance industry to share knowledge and encourage debate on the most relevant topics dominating the attention of the industry’s leading exponents.
Brochures
The Cayman Islands is known worldwide as a premier jurisdiction for international insurance business. From our long history as a pioneer in captive insurance to setting the latest trends in reinsurance and insurance linked securities (ILS), Cayman has been a true leader in offshore financial services. But what makes Cayman so special?
International Insurance – Leading the Pack
Take a look at our series of brochures and understand why so many companies around the world trust the Cayman Islands for insurance services.
Continuing Education
We never stop learning. Cayman is pleased to be associated with the leading authority in continuing education in our industry. The well-established, International Center for Captive Insurance Education (ICCIE) provides a range of learning options for professionals in the captive insurance arena, working towards a professional designation.
Your Professional Designation in Captive Insurance
View the links below for further information about the ICCIE and their course options.
Visit ICCIE and ICCIE Course Catalog.
The Learning Options
Associate in Captive Insurance (ACI) – The established industry standard, the ACI is the educational training designation created by the captive industry. The designation is comprised of nine courses and three “hot topic” webinars. More than 450 professionals have already completed the ACI, with another 1,500 in progress. Cost: $4,600, made in two payments.
Certificate in Captive Insurance (CCI) – Launched in 2015, the CCI is a step benchmark that requires approximately half the coursework (four courses) of the ACI — plus the CCI allows individuals to specialise their certificates. Cost: $2,600, made in one payment.
Also available are Individual Courses and Modular Block Options, which allow significant savings, as well as webinars. All ICCIE offerings can be taken ‘a la carte’ and once started it is easy to convert to another program.
For additional information, visit the ICCIE website (www.iccie.org) or call: 1-866-60-ICCIE (1-866-604-2243) Email: info@iccie.org
Captive Insight
The magazine for the Cayman Islands captive insurance industry and its stakeholders around the world.
Click here to read more.
Useful Links
News
Legal and Regulatory
Business Environment
Video and Podcast Interviews
Visiting the Cayman Islands
Living and Working in the Cayman Islands
Cayman New Resident – Cayman Guide
FAQs
What is a captive?
A captive is a wholly owned insurance subsidiary of an organisation not operating in the insurance business. Its primary function is to insure some or all of the risks of its parent company which may be a group of hospitals, for example.
It is generally owned through a common interest which is not engaged primarily in the business of insurance. This interest may be a single-parent shareholder or a group of shareholders.
A significant portion of the risks written are “captive”, related in some way to the risks of shareholders, or third-party risks which the shareholders control. In this respect a captive is an insurer that writes risks whose origins are restricted, or those risks to which it has unique access.
What does typical coverage include?
The primary policy, which provides coverage directly to the parent or stakeholders is usually assumed by the captive, while excess coverage would be purchased in the traditional market. Additionally, an umbrella or stop-loss policy would come from the traditional market.
A fronted policy, which is coverage provided through the traditional insurance market, is utilised to cover the risks of the stakeholder group.
What are the benefits of owning a captive?
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- Insuring the uninsurable – provision of coverage not readily available in commercial market or for which market rates or conditions are prohibitive.
- Cost reductions – the offshore captive can reduce expenses such as administration and settlement of claims, loss control expenses, various state and federal taxes, brokerage commissions, and other acquisition costs and consulting fees.
- Risk retention, risk management and loss control – when a company has a better loss history than its industry average, the retention of its own risk can result in a lower premium.
- Cash flow benefits – through investment income and flexible premium payment plans.
- Tax minimisation or deferral – premiums payments by insureds to properly structured, adequately capitalised captive insurance arrangements are deductible for U.S. Federal income tax purposes.
- Access to the reinsurance market – direct access can result in reinsurance that is less expensive than conventional direct excess and umbrella coverage. There is also the opportunity to reduce costs by combining two or more lines of risk.
- Diversification into a profit centre – a captive is able to diversify into open market insurance operations and operate as a separate commercial profit centre. The captive can also generate profits from third party unrelated business.
- “Unbundling” of services – when a company is not satisfied with the technical services provided by its conventional insurer and wishes to “unbundle” risk control and claim handling services from the actual purchase of insurance cover.
- Reduction of government regulations and restrictions – includes a professional, yet flexible regulatory environment, widening investment opportunities and the facilitation of legitimate international movement of funds.
What are the different types of captives?
Single Parent Captive
This is an insurance or reinsurance company that only insures its parent of affiliated companies.
Group Captive
An insurance company that insures or reinsures the risks of either a homogeneous or heterogeneous group of companies who may, or may not, be owners of the company.
Association Captive
A company owned by a trade association and used to meet the insurance needs of its members
Agency Captive
A company owned by an insurance agency which utilises it to take risk on some of the business they place in the insurance market .
An umbrella or stop-loss policy
Coverage acquired by the captive in the traditional reinsurance market.
Segregated Portfolio Company (“SPC”)
A company which acts as the “core” and various segregated cells which take on particular risks. The assets and liabilities of each cell are segregated from each other. Ownership of the assets in the cell can be by way of either a non-voting preferred share or through a participating agreement. This is a useful vehicle for those programs not large enough to set up their own captive or who do not wish to manage their own captive.
Risk Retention Group (“RRG”)
A type of captive available in US domiciles which is an insurance company licensed under the Federal Risk Retention Act of 1981, as amended in 1986, which allows an insurance company licensed in one state to write business in all states without needing to get licensed there. An RRG is owned by its insureds and can only write liability business.
How are captives regulated?
The financial industry in the Cayman Islands is regulated by the Cayman Islands Monetary Authority (CIMA).
The Insurance Division is granted powers to regulate the insurance industry under the Insurance Law (2010 Revision) and is responsible for the supervision of all insurance companies in the Islands, whether they operate domestically as Class “A” companies or are Class “B” insurance companies accepting overseas risks.
The Insurance Division CIMA has four regulatory objectives:
- Understand the insurer and its business environment
- Detect solvency problems
- Detect non-compliance with legislation
- Resolve detected problems early
What is the history of captive concepts?
In the mid 1970’s, the professional liability markets were in a major crisis. The evolution of a sophisticated legal structure in the United States, and in particular developments in tort law, led to an unexpected increase in liability claims. The hospital systems were particularly affected, and the health administrators were becoming increasingly disillusioned with the spiraling number of malpractice suits.
Out of this crisis, a prominent U.S. medical college developed the first Cayman Islands captive insurance company to provide coverage for their medical malpractice risks for their physicians. Given the success of this captive, other hospital systems soon followed, making Cayman a leading domicile for healthcare captives.
Given the sudden development of this new area of business, a new regulatory framework was required to monitor this business and in 1980, the Insurance Law was introduced.
Business is now spread amongst a diversity of companies ranging from small private shareholders to large public corporations. Types of coverage vary from worker’s compensation and product liability to life and annuity business.
The newest industry trend is the segregated portfolio company, (SPC), known elsewhere as the protected cell company. This concept has developed from the rent-a-captive legislation wherein there is no legal distinction between each member. The SPC provides a facility for the legal segregation of funds.
Why choose Cayman?
- Highly developed professional services capability in insurance managers, lawyers, bankers and accountants
- Robust, commercially-minded regulation
- Freedom of investment management
- Reasonable capital requirements
- Freedom from various state regulations
- Political and economic stability
- An established, familiar legal system, based on English Common Law
- Effective crime legislation
- Possible tax benefits
- The absence of exchange controls, and the opportunity to transact business in any major currency
- Absence of income capital gains or other taxes
- Access to the reinsurance markets either locally or in major insurance centers
- Strong infrastructure and easy access to the jurisdiction
What are Insurance Linked Securities?
Insurance Linked Securities, typically identified as Catastrophe Bonds or Cat Bonds, are financial assets sold to investors, where their value is determined by the occurrence of an insured event, such as a hurricane, wild fire or other natural disasters in addition to longevity
Why are Insurance Linked Securities attractive to investors?
The benefit of Insurance Linked Securities from an investing standpoint is that they are uncorrelated to traditional financial markets, so if global stock markets, for example, were to suffer a major correction, the value of the ILS is unlikely to be affected.
How are ILS deals set up in the Cayman Islands?
ILS deals take place in the Cayman Islands through Special Purpose Vehicles, licensed by the Cayman Islands Monetary Authority as Class C Insurers. The obligations of the Class C insurer are limited in recourse and funding to the insurer’s funding sources or the proceeds of the notes sold.
Why is Cayman viewed favourably by international insurance market participants?
All ILS deals that take place in the Cayman Islands are fully collateralised and funded so stakeholders recognise funds are in the hands of the insurance company until settlement needs to take place. Additionally there are no requirements for additional layers of regulatory capital and the minimum capital requirement is $500.
How is Cayman’s regulatory body perceived in its licensing activity for ILS transactions?
The Cayman Islands Monetary Authority has a reputation for flexibility and collaborative dialogue with license holders. This is true in the ILS sector, where CIMA demonstrates a commitment to understand the ILS business model and work with companies to create solutions.
How quickly can a Class C Insurance Company License be obtained in the Cayman Islands?
Following the submission of a business plan and license application, providing all documents are in order and the submission is in the correct format, CIMA is able to make a decision on a license in around six business days.
What corporate vehicles can be used as the SPV for an ILS transaction?
Cayman’s flexible corporate environment presents a range of different vehicles for ILS transactions and the most common is the Cayman Exempted Company, which can be established in just 24 hours. Alternatively, Cayman’s Segregated Portfolio Company (SPC) legislation, where Portfolio Insurance Companies can contract with each other and share reinsurance arrangements, provides the option to form a new cell within an existing SPC structure.