Trends in healthcare
More than half of the Cayman Islands’ captives relate to healthcare,
and medical malpractice liability continues to be the primary line of
business, with approximately 32 percent companies re/insuring it,
and workers’ compensation the second largest with 22 percent of
companies assuming this risk.
Some of the healthcare captives in the Cayman Islands were licensed
30 to 40 years ago, and some of the larger healthcare systems in the
US have some connection to Cayman.
One trend quite prevalent in the Cayman Islands is the consolidation
of healthcare systems—often due to a drive for synergies and
economies of scale.
The 2010 US Affordable Care Act resulted in consolidation in the US
healthcare industry, which in turn has led to the merging of captive
“We are still seeing some mergers and acquisitions (M&A) activity
being driven by efforts to become larger and more efficient as costs
come under pressure,” says Poole.
If it’s not to happen through acquisition, he sees a greater emphasis
on smaller regional hospitals entering into working relationships
through the use of strategic affiliations or alliances also to drive
“Overall the impact on captives is that an acquiring entity may find
itself owning two or more captives, which is leading to mergers or
rationalisation of the captives that are as a result becoming larger in
terms of premiums and assets,” he says.
“These larger captives have the ability to assume higher limits or
expand lines of business.”
MacDonald also notes that M&A activity continues to affect the
healthcare captive market with migration to a smaller number of
captives—albeit in more robust forms.
At the end of 2017, Cayman had new issued 33 licences. The
domicile did have a few surrenders and cancellations of insurance
licences, bringing down its number of formations year on year, largely
due to consolidation in the healthcare sector, maturing programmes
and catastrophe bonds.
“The resulting captives are providing coverage to a greater number of
insureds and expanding into additional product lines such as surplus
lines deductible coverage, reinsurance for the downside performance
risk of accountable care organisations (ACOs), and medical stop loss
for health benefit plans,” she says.
MacDonald adds that healthcare captives are now subject to more
scrutiny to ensure that they are continuing to enhance their parent
systems’ overall risk management programmes, in terms of both loss
control and financial management.
“This additional scrutiny is positive as it provides the system with
more detailed information on their captive subsidiary, and how best to
evolve and expand the captive’s insurance program,” she says.
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Dean Mitchell / iStock Photo
While the Cayman Islands has long been hailed as
the leading jurisdiction for captives in the healthcare
sector, there is a lot of activity going on outside this
space, which together are keeping the domicile
competitive and positioning it for growth in 2018.
Cayman had ended 2017 with 33 new insurance licences
compared with 39 in 2016. This included 27 new class B insurers
(captives and segregated portfolio companies) and six class C
insurers (special purpose insurers).
In the first half of 2018, however, the Cayman Islands Monetary
Authority (CIMA) issued a total of 17 new licences. As of June 30,
2018, there were a total of 698 class B, C and D insurance companies
and 26 insurance managers under supervision. There were a total
of 821 insurance licensees under supervision, of which 97 and 724
related to domestic and international insurance markets, respectively.
Cindy Scotland, CIMA’s managing director, said that steady growth
is projected to continue in the Cayman Islands insurance sector
throughout 2018 and 2018, and that captive insurance structures
are being put to more sophisticated use by their owners.
Kevin Poole, client services director at Artex Risk Solutions,
suggests this strong start to the year compares very well to the same
period in 2017 when nine licences were issued, and the expectation
for 2018 is that in excess of 40 new licences will be issued.
While around half of Cayman’s captives are focused on healthcare,
a number of growth areas outside this have picked up steam as the
industry continues to evolve and innovate.
Poole notes that Cayman’s expertise in both healthcare and group
captives continues to drive captives formations, and its overall
reputation as a well yet proportionately regulated domicile is helping
to attract more business.
He adds that some current unease caused by regulators in other
domiciles is helping make the domicile decision easier, but there
are not many issues with redomiciliation at present.
“It is one thing for any particular US state to pass captive legislation,
but quite another to have, on day one: knowledgeable regulators,
insurance managers, auditors, lawyers and bankers, etc, in order to
service the business to be written,” he says.
Monique MacDonald, senior vice president at Global Captive
Management, suggests that the captives market remains strong,
with growth in existing and new captive insurance structures, with
the latter expanding their coverages.
“While Cayman is competing with onshore domiciles, this high
level of expertise, combined with robust yet sensible legislation,
ensures retention of captives over the long term,” says MacDonald.
“Like a sturdy seasoned ship with a new coat of paint, the Cayman
Islands remains a jurisdiction of quality and strength even as it
evolves to meet industry demands.”