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According to a very experienced captive insurance manager in Cayman, the outlook for the industry for 2010 in comparison to 2009 is “fair to good”.
Captive insurance companies are insurance companies formed by its parent group with the specific objective of financing risks emanating from their parent group. A business forms its own insurance company subsidiary to insure itself against retained losses in a formal structure.
Bermuda and Cayman are the traditional hubs for the offshore captive insurance industry, thanks to the highly robust and reactive regulatory frameworks in place in both jurisdictions. Recent figures show 885 captive insurance companies currently registered in Bermuda, and 778 in Cayman.
Cayman Island Monetary Authority (CIMA) figures released as at 31st December 2009 indicate that Cayman formed 40 new captives in 2009, 25% more than the 32 in 2008. A welcome surprise according to many in the industry. The industry appears to have weathered the economic storm well, suffering just one involuntary liquidation during the financial turmoil of 2009.
Captive industry experts believe that although the worst is hopefully over for the investment markets, US companies will be slow to commit capital for such projects as captives whilst the commercial insurance markets continue to offer favourable rates.
A similar story is being reported in Bermuda, Bermuda Monetary Authority in a press statement released in the last week last week reports that the Bermuda insurance market continued to record strong performance, against the backdrop of a prolonged soft market and the effects of the worst financial crisis in a generation.
Jeremy Cox, CEO of the Authority said, “The Bermuda market continued to record impressive results in challenging economic conditions. The market has fared very well, reporting significant results both in underwriting premiums and total assets. Almost $20 billion in gross premiums written by the captive sector in a soft global market supports Bermuda’s position as the leader among captive domiciles.
“While some companies did experience losses over the past year impacting capital levels, the market still remains highly capitalised and these losses were primarily related to impairments within their investment portfolios, in line with global trends,”
Incorporations increased slightly during 2009: a total of 42 new (re)insurers were established in the Bermuda market during the year, as compared to 40 in 2008. The greatest proportion of business came from the US during the year, with respect to both the captive and commercial markets.
A concern for Cayman and Bermuda at the present time is the re-domiciling of captive insurance vehicles to new captive jurisdictions being established within the U.S. and elsewhere globally. However the advantages of a long established and reliable world-class regulatory framework should continue to give Bermuda and Cayman the edge over the new so called offshore-lite jurisdictions.
In its quarterly newsletter, IMAC, the Insurance Managers Association of Cayman, is looking forward to growth in the sector in 2010.
The steady pace of the industry in the last year has meant that we’ve seen the rate of recruitment decline over the last 12 months with captive managers mainly recruiting for staff attrition. There is still demand in the employment market for strong accountants with two to three years captive insurance experience.
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