38 cayman captive 2019
“IN CAYMAN WE ARE DEFINITELY SEEING MORE
INTEREST IN THE FORMATION OF B(III) LICENSEES,
BEING THOSE THAT WRITE PREDOMINANTLY THIRD PARTY
BUSINESS.” KEVIN POOLE, ARTEX RISK SOLUTIONS
Cayman continues to lead on healthcare, but it is also exploring other ways
to make the domicile attractive to owners and prospective captives owners.
One such area outside healthcare is segregated portfolio companies
(SPCs) and group captives which, MacDonald says, are flourishing,
as small and medium-sized entities (SMEs) seek coverage with more
predictable pricing and greater ability to direct loss control.
“The ability to obtain coverage in an alternative risk transfer (ART)
structure without substantial capital injections attracts SMEs to group and
SPC captives,” she says.
“New prospects appreciate that captive insurance participation allows
them greater ability to participate in the handling of their own losses and
to focus on the high-risk areas producing adverse losses.”
Further to this, MacDonald notes that agency and broker-owned captives
continue to be of interest in the domicile as agents pursue additional
competitive advantages in the ART industry or identify profitable blocks
of business that fit well in a SPC or group structure.
While Cayman’s international insurance industry comprises mainly
companies insuring risk in North America (90 percent), it should be noted
there are a few Canadian companies and there is some interest from the
Far East, Latin America, Europe, and Africa.
Poole notes that the cell company concept continues to be popular,
with more clients considering using portfolio insurance company (PIC)
“We have seen formations and interest in Cayman from regions such as
Australia, the MENA and South America,” says Poole.
Another area where MacDonald sees some interest is in the coverage
for medical cannabis through a captive structure.
“While captive insurance coverage is not yet available to US entities
due to US federal restrictions, coverage can be provided to the Canadian
market,” she explains.
Medical marijuana is already legal in Canada, and recreational cannabis
was legalised on October 17. There are almost 100 cannabis producers
in Canada, which could present an opportunity for captives to step in.
“The flexibility of the captive structure easily allows for this evolution, and
healthcare systems will continue to utilise captive insurance as a valueadded
Captives in Cayman have generally been formed to underwrite related
party risk, which can be seen in the large amount of healthcare, group
and other pure captives within the jurisdiction.
Since the introduction of dividing the pool of class B licences in 2012 into
three separate sub-classes, there has been an emergence of captives
that are writing unrelated cover, particularly in the last couple of years.
“Existing captives are expanding coverage and there is greater interest
in new captives formations, especially in relation to unrelated risk,” says
The class B insurer’s licence permits an exempted insurer to carry
on insurance business other than domestic business, in respect of
which (i) at least 95 percent of the net premiums written will originate
from the insurer’s related business; (ii) more than 50 percent of the net
premiums written will originate from the insurer’s related business; or
(iii) 50 percent or less of the net premiums written will originate from the
insurer’s related business.
CIMA statistics show that four new class B(iii) licences were issued in
the second quarter of 2018: Gardant Risk Solutions; Navesink Insurance
Company; Poseidon Reinsurance Company; and TPAC Risk Partners
A similar trend can be seen from last year: in the first half of 2017, nine of
the 13 new B licences issued were B(iii) captives formed for the purpose
of writing 50 percent or more of unrelated risks.
“In Cayman we are definitely seeing more interest in the formation of
B(iii) licensees, being those that write predominantly third party business,”
“Cayman’s expertise in healthcare and group captives continues to
drive captives formations, while startup costs for those forming B(iii)
captives mean Cayman remains the domicile of choice.”
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