Cayman has come through a series of international initiatives with its reputation enhanced. The insurance market has finally shrugged off the soft market that dogged it for 13 years. The events of 11 September shook everyone's confidence and underlined the need for insurance.

The past 12 months have been a testing time for offshore jurisdictions. Initiatives by the Organisation for Economic Co-operation and Development (OECD) and the Financial Action Task Force (FATF) have probed in great detail the inner workings of fiscal and regulatory regimes in every offshore jurisdiction. A number of onshore jurisdictions have also been examined, and some found wanting. Leading British Overseas Territories were investigated by KPMG on behalf of the British Government.

The initial selection for review by the OECD and FATF of all those jurisdictions that might or might not have been classifiable as tax havens was arbitrary, potentially enormously damaging and, some might argue, immoral. The behaviour of the investigators strongly suggested that a second agenda was at work, as many small jurisdictions charged. If reputations were to be tainted and economies destroyed, the very minimum due diligence that would have been required was a detailed examination by the investigators of the systems they accused of failing to meet international standards. Such attention to detail was not always forthcoming.

Undoubtedly, the investigators took a high-handed approach. Meet us on our terms, they appeared to say, or face the consequences. By the time George Bush made it plain that his Administration would no longer tolerate the OECD's behaviour, the damage had been done in many cases. A small number of jurisdictions emerged from the process with their reputations not only intact, but enhanced. That small number, essentially, was two: the Cayman Islands and Bermuda. By agreeing to adhere to the highest international standards of regulatory oversight and legislation, the Cayman Islands made it plain that they had nothing to fear. Much of what the alphabet soup initiatives demanded was already in place, even if some of it was standard practice rather than law.

It was not enough that Cayman agreed to meet standards; it had to be seen to meet them. Accordingly, much of what had been the informal process of protecting Cayman's reputation has subsequently been formalised in legislation. Those who argued that Cayman might do well to decline to play the OECD's game have been proven wrong by subsequent events.

Having satisfied the international bodies, Cayman has experienced a surge of international interest. If those jurisdictions that fail to meet international standards are to be considered pariahs, then, surely, those which meet those standards must be considered full-blooded members of the international family. Cayman turned a potential reverse into a badge of honour – and rightly so, since it had never been on the OECD's infamous hitlist.

Coincidentally, the lengthy soft market that had dogged the insurance industry began to come to an end about 12 months ago. Insurance premiums, in many instances, were lower in 1999 than they had been in 1984. For the multinational corporates, captive formation was nowhere near the top of the agenda. Why make the effort when brokers and insurers were offering such low rates?

Much of that changed in 2001, and one result has been a surge of interest in captive formation in Cayman. With insurance premiums climbing, treasurers and finance directors looked afresh at the concept of captive ownership.

The unspeakable events of September 11 changed the shape of the global insurance market. Premiums soared as capacity began to dry up in several lines. Many of those who had agreed to contribute to this report were suddenly unable to find the time to do so. “I barely have time to see my family,” one potential contributor said, “let alone to consider any kind of extra-curricular activity.” A Cayman insurance manager with 30 years in the industry said he “simply could not recall a time in my experience when things were this busy.” The prospect, he added, was that “things could only get busier as we begin to digest, in a less emotional manner, the real effects of September 11.”

One of those effects is a redefinition of risk. As Brian Duperreault, chairman of Cayman Islands-registered insurer ACE Ltd said: “Prior to September 11, some regarded insurance as a sort of penalty you had to pay for being in business. Now, they have an entirely different view.”

The professionals whose opinions and experience are expressed in this third annual Global Reinsurance Cayman Islands Special Report have all experienced the effects of this year's growth on their business. As Cayman has continued to update its legislation, it has been picked up on the radar of decision-makers throughout the insurance industry. As one of few offshore jurisdictions free of the taint associated with the OECD and FATF listings, Cayman is well positioned to take advantage of the new appreciation of the advantages of captive insurance.

With many European and North American insurers reconsidering the coverages they offer, the short- and medium-term prospects for Cayman look very good. That is no accident. With the experience and input of the Insurance Department of the Cayman Islands Monetary Authority, Cayman is likely to remain a welcoming jurisdiction for companies looking for a stable economic and social environment, a government committed to growing its international insurance sector, and a developing pool of insurance expertise and innovative ideas.

Roger Crombie is freelance journalist and living in Bermuda.