Global Captive Management
licences being granted in the Cayman Islands were formed for the purpose
of writing 50 percent or more of unrelated risks. The 2017 trend of new
licences supports what Global Captive Management (GCM) has been
seeing in the marketplace.
B(iii) captives can be formed under a number of different models
including agency, investment fund or other organisationally-owned
entities. GCM has experienced an increased interest in agency-owned
captives coming to the Cayman Islands in particular. While these
captives have a common link in attracting business—ie, the agency—
the underlying insured would not be related to the members.
If an agency-owned captive also underwrote some of its own risk
then depending on the allocation of premiums, the captive could
be a prime candidate for a B(iii) licence. Additionally, GCM has also
witnessed growth of existing successful and well capitalised B(i)
captives looking to offer their captive strategies to other businesses
which may not have the capital, experience, or capacity for starting
their own captive.
A B(iii) captive, by nature of its independence to 50 percent or more
of the premiums, requires additional consideration during its formation
and operation. Given the potential inherent increase in underwriting
risk for insuring unrelated parties, there are increased minimum and
prescribed capital requirements and potentially additional actuarial
Those considering obtaining a B(iii) licence should be aware of
related corporate governance responsibilities, not only to meet
regulatory requirements but also to implement industry best practices.
A well-advised B(iii) captive should ensure its captive manager is
knowledgeable and experienced in captives writing predominantly
The trend of increasing B(iii) captives in the Cayman Islands should
come as no surprise to those familiar with the vibrant jurisdiction. With
robust regulation and knowledgeable, experienced service providers
those exploring captive programmes of unrelated risk should continue
to examine all the Cayman Islands has to offer.
Ian Bridges is vice president at Global Captive Management. He can be
contacted at: email@example.com
cayman captive 2018 53
The trend of Cayman captives writing unrelated risk is continuing
and should come as no surprise, as Ian Bridges of Global
Captive Management explains.
The Cayman Islands has long been considered a jurisdiction
of choice for a number of captive models—healthcare, group,
large corporate and other pure captives—all of which are
generally formed to predominantly underwrite related party risk.
Starting in 2017, the Cayman Islands Monetary Authority (CIMA) has
published data on its separate B sub-class licensees. Sub-class is
determined by the level of unrelated net premium written. There are some
intriguing results for recent licensees supporting the understanding the
Cayman Islands continues to be a diverse and evolving domicile.
In 2012, regulations to the Insurance Law 2010 were finalised,
bringing into force the law and the process of dividing the pool of class
B licensees into three separate sub-classes, each based upon the
percentage of related business the captive writes:
• Class B(i): at least 95 percent of the net premiums written originate
from the insurer’s related business;
• Class B(ii): more than 50 percent of the net premiums written originate
from the insurer’s related business; and
• Class B(iii): 50 percent or less of the net premiums written originate
from the insurer’s related business.
To assist the industry in the process of reclassifications, CIMA
published a Frequently Asked Questions (FAQ) list. Included in the list
was clarity over what was to be considered ‘related’ and ‘unrelated’
business. The FAQ quoted related business as “business which will
originate from the insurer’s members or the members of any group
with which it is related through common ownership or a common risk
management plan, or as determined by CIMA”.
The majority of, if not all, healthcare, group, large corporate and other pure
captives, naturally fell in the class B(i) category. At the end of the second
quarter of 2017, 836 insurance-related licensees were issued and 673 were
B-licensed captives; 522 of the 673 B-licensed captives (77.6 percent) held
a B(i) licence. By contrast, the 134 B(iii) captives accounted for almost 20
percent of all B-licensed captives. But there is more to the story.
CIMA published a listing of all new licences granted in 2017 up to June 30,
2017. Of the 13 new B licences issued, four were B(i) captives; perhaps
surprisingly nine were B(iii) captives. Therefore, almost 70 percent of new
“ALMOST 70 PERCENT OF NEW LICENCES BEING GRANTED IN THE
CAYMAN ISLANDS WERE FORMED FOR THE PURPOSE OF WRITING 50
PERCENT OR MORE OF UNRELATED RISKS.”