Harvey Gowers, KPMG; Jacob MacAdam, Appleby; Suzanne Sadlier, Artex Risk Solutions; Robert Humphreys, PwC; and John Forni, Grant Thornton at the ReConnect conference on 19 April 2024.
More than 400 reinsurance professionals attended ReConnect, Cayman’s first dedicated conference to the industry sector on 18 and 19 April at The Ritz-Carlton.
The event organised by the Cayman Islands Reinsurance Companies Association (CIRCA) attracted 160 delegates from overseas and showcased Cayman as an emerging domicile for reinsurance.
Deputy Premier and Minister for Financial Services André Ebanks called reinsurance “the final piece of the puzzle” in his keynote speech that described the history and development of the Cayman Islands as a financial centre.
Cayman is building on a five-decade old captive insurance industry and has recently seen a convergence of reinsurance and the investment funds space that it is best known for.
Combining Cayman’s investment fund capabilities with reinsurance solutions is “a perfect marriage”, the deputy premier said.
Jacob MacAdam, partner at Appleby, said in the current market his firm is seeing activity from established reinsurers setting up entities in Cayman, US-based insurers selecting Cayman as a location for their reinsurance vehicles and new entrants to the market often backed by institutional investors and asset managers.
The Cayman market is currently dominated by life & annuity reinsurance with $33.1 billion in gross premiums written and total assets of $65.6 billion in the first quarter of 2024, CIMA statistics show.
Delegates heard the opportunities for reinsurance in life & annuity are only going to grow as $360 billion of new annuities were written in the US last year alone.
Speakers at the event stressed that despite a recent surge in interest, the sector is not new to the islands and features some long-time established local reinsurers.
The same factors that had attracted these reinsurers, such as Greenlight Re or Knighthead Annuity & Life Assurance Company, still hold firm today.
MacAdam highlighted Cayman’s stability, with an attractive credit rating and a commitment to tax neutrality, as a key factor valued by market participants. The same applies to the established legal system based on English law with ultimate recourse to the Privy Council in London.
Additionally, there is the flexibility in legal structuring with exempted companies or segregated portfolio companies, and a sophisticated community of service providers.
Cayman’s standing in the funds space, meanwhile, ensures that institutional investors or private equity investors who are seeking to set up a reinsurer naturally gravitate towards the Cayman Islands.
Local immigration laws offering a clear path to residency and a flexible work permit system are another important element in attracting those reinsurers that aim to set up a physical presence on island, he said.
Cayman offers tax certainty
John Forni, managing director, Corporate Tax, at Grant Thornton LLP in New York, said Cayman’s decision not to implement the global minimum corporation tax will also affect a reinsurer’s decision to domicile in the islands.
The global minimum tax will require multinationals that have revenues of more than EUR750 million to make complex calculations to compute their effective tax rates in each jurisdiction. Global tax compliance in Cayman, in contrast, is “a lot easier and a lot less expensive”, Forni argued.
He said Cayman’s tax model is globally responsible and supports an efficient flow of capital without posing a threat to any other country’s tax base.
“Cayman maintaining its tax neutrality is very important to reinsurers” and “shows a real commitment to tax certainty”, he added.
Responsive and engaged regulator
Suzanne Sadlier, a former regulator with the Cayman Islands Monetary Authority (CIMA), who now heads Artex Risk Solutions’ captive management in North America, in turn, highlighted CIMA as responsive, engaging, approachable and supportive.
“CIMA will make sure to understand your intentions and then find the best way to get there,” Sadlier said.
She noted that Cayman’s sophisticated regulatory environment is fully embedded in the global space and that international cooperation is one of the regulator’s key pillars.
CIMA was one of the founding members, and remains an active participant, of the International Association of Insurance Supervisors (IAIS), Sadlier said.
Reinsurer capitalisation in Cayman, one of the important tools used by regulators to ensure solvency and protect policyholders, is proportionate to an individual reinsurer’s risk profile and agreed with CIMA during the license application process.
This makes the Cayman capitalisation model bespoke and flexible within the rules of the IAIS without relying on blanket prescriptions.
Robert Humphreys from PwC said more than 90% of the risks reinsured through Cayman are related to the United States and it would not make business sense for Cayman to adopt, for example, Europe’s capitalisation framework, Solvency 2, as most US insurers are not subject to it.
Increasing alignment with US insurance regulations
Instead, Cayman is looking for closer ties with regulators in the United States.
Kara Ebanks, head of the Insurance Supervision Division at CIMA emphasised Cayman’s strong working relationship with US regulators in the National Association of Insurance Commissioners (NAIC).
CIMA has been regularly participating in meetings with US state regulators at the NAIC for years.
Ebanks confirmed that the Cayman Islands is seeking qualified jurisdiction status from the NAIC. This would align Cayman’s reinsurance framework even more with that of the United States.
She told delegates that Cayman had secured the support of one US state with its ongoing application process.
Once obtained, recognition as a qualified jurisdiction would benefit Class D licensees – reinsurers that have a physical presence in Cayman – by reducing existing collateral requirements for qualifying reinsurers.
Achieving and maintaining the status, however, involves a very rigorous process and will take time.
Kathy Belfi, a former insurance regulator in the state of Connecticut, said the fact that Cayman had found a sponsoring state for its application “tells a big story”.
“The US obviously wants Cayman to succeed. You have a lot of our business,” she said and added that it will give US regulators “a whole lot of comfort”.
