Whilst traditionally the Cayman Islands has deservedly been recognised as a leading captive jurisdiction, around 70% of all licences issued by the Cayman Islands Monetary Authority (“CIMA”) in recent years have been for commercial or affiliate reinsurers, with private equity groups, traditional reinsurance and insurtech increasingly selecting Cayman for the establishment of side cars and reinsurance platforms. The confidence in the jurisdiction has been evidenced by the entry of larger players in the life & annuity space, including RBC Re’s redomicile from Barbados to Cayman in 2021 and Talcott Re’s establishment of a Cayman reinsurer which assumed a US$26 billion block of business in 2022. CIMA’s release of a regulatory policy on requirements for licensing a Class D reinsurer last month further cements the expectation that the growth of this licence class will continue on a strong trajectory in the coming years.
The ideal jurisdiction of domicile for a new reinsurer is driven by a multitude of factors and there is no one size fits all. These include the goals of the client and the interests of their stakeholders such as investors and cedants and a wide variety of other variables will need to be taken into account in determining the ideal jurisdiction, including size of the sponsor’s balance sheet, type of business proposed and jurisdiction from which cessions will be sourced including the requirements of the regulators of the targeted cedants and rating considerations (if any), among others. We wanted to highlight some of the reasons we are seeing clients consider Cayman to be not only a viable option, but a premier jurisdiction for establishing a new reinsurer platform.
- Tailored Capital and/or Accounting Models: Cayman does not have Solvency II equivalency or NAIC reciprocal jurisdiction status (at least not yet…), which means our legislative and regulatory regime is less prescriptive and therefore affords prospective Cayman reinsurers greater flexibility to propose a bespoke capital model to our regulator without being significantly constrained by specificities in legislation. Of course, any such model will need to be actuarially supported and will likely require regulatory approval from the relevant cedant’s regulator and there are a host of other guardrails inherent in cross-border cessions, but having some degree of flexibility is of course attractive. Our regime also permits the selection of “an internationally recognised accounting standard” which affords some flexibility in the accounting approach to be taken. All Cayman licenses are subject to annual financial audits, so the accounting firm and CIMA will need to be comfortable with the approach, but, again, there is a degree of flexibility afforded to the licensee.
- No day one presence requirement for B(iii) reinsurers: A Class B(iii) licensee may engage and rely on a Cayman Islands licensed insurance manager to provide accounting, administrative and other management services, without the necessity for the reinsurer to put boots on the ground, either in the C-suite or other roles from day-one. Whilst Class D licensees are required to have a physical presence and resourcing from the point of licensing, CIMA generally allows flexibility for the on-island employees to be built out proportionate with the size and growth of the licensee’s business.
- Attractive lifestyle for employees: For Class D licensees or other clients who prefer to have C-Suite officers on the ground in Cayman, the Cayman Islands Government allows for a 25 year work permit exclusively for reinsurance executives (as detailed further in our article on our immigration practice in Conyers Coverage Issue 9). Expats can also own and invest in property. The quality of the schools, infrastructure and lifestyle offered on the Island are some of the softer attractive features of establishing a reinsurer in Cayman for those looking to build out resourcing in the long term.
- Speed to market: CIMA’s published timeframes for the approval of a new licence is 6 to 8 weeks from the time of submission of a complete and comprehensive application. This provides commercial certainty for groups looking to have a licence in place in order to write a transaction with inherent deadlines. CIMA is known to be commercial and available which permits licensees to build strong working relationships with the regulator.
- Financial, political and economic certainty: Cayman’s stability (financially, politically, economically) particularly relative to other offshore domiciles (for example, the Cayman Islands runs an attractive budget surplus – see link as follows published on 12 April for more details: https://www.gov.ky/news/press-release-details/government-2022-revenues-top-1-billion. On global minimum tax (GMT), the Cayman Islands Government has expressly stated that it does not intend to enact local legislation in the Cayman Islands for the purposes of collecting taxes locally. The Government will of course fully co-operate with global tax authorities as part of the wider GMT initiative, but given the country’s healthy financial surplus there is no incentive to generate additional revenue via GMT.
Conyers is the only law firm in both the Cayman Islands and Bermuda with Tier 1 ranked insurance practices by the legal directories. At Conyers, we are often asked by clients and onshore firms alike as to why one jurisdiction would be selected over the other as the preferred domicile for a (re)insurance platform. The benefits of both jurisdictions has been evidenced by increasing numbers of traditional insurance groups and private equity groups establishing reinsurance platforms in both jurisdictions. Recent structures have included both affiliate reinsurers in each of Cayman and Bermuda, as well as off balance sheet sidecars with the operating entity in either Cayman or Bermuda. There is no one size fits all approach and the Conyers team is well versed to advise clients of the benefits of a particular jurisdiction having regard to the specific goals of the client.