The captive insurance industry is experiencing a period of rapid expansion and the captive business in the Cayman Islands continues to share in such growth. Barry Yetton reviews the reasons and outlines a captive company's banking needs.
Following many years freewheeling within a soft market cycle, it became clear late in 2000 and early 2001 that the re/insurance market was hardening. The gradual and then rapid collapse of global stock markets and finally the tragic events of September 11 accelerated the hardening process. As a result, it has not been uncommon for insureds to experience premium increases in excess of 100% over the past 24 months.
History has proven that when immersed in such an expansive hard market, the formation and the use of captive facilities does nothing but increase. This is very much the current experience for the Cayman re/insurance market, which boasted some 577 captive insurance companies registered as at 30 September 2002 writing more than $4bn in premiums. Over 35% of these companies are healthcare-related, demonstrating Cayman's continuing popularity with organisations engaged in all aspects of health service provision. There is no doubt that the Cayman captive market is in full swing expansion.
So, a hardening market is part of the reason why Cayman's captive business continues to grow. But what are some other reasons? The Global Reinsurance survey of April 2002 confirmed that Cayman continues to be well known for "ease of incorporation, quality of management, receptive regulation and quality of infrastructure". But underpinning this framework lies an essential foundation - the presence of a rock-solid first class banking industry.
Both the banking services available and the banking regulation found in Cayman have kept pace, and in many ways have led, the field in meeting today's re/insurance business requirements and the global concern for tight fiscal control. The stringent regulatory requirements for bank account opening and operation within Cayman continue to have little impact for the re/insurance market, which operates from a very transparent base. Indeed, such regulation simply provides additional comfort for all involved to confirm the integrity of and logic supporting the business decision and the jurisdiction of choice.
Much has been written over the years by banks claiming to offer the `one stop shop' or `complete comprehensive service' for the captive market. But what does that mean, and does such a bank really exist? The banking services required of the captive industry are a mix of tradition and innovation, but in our experience centre on a core need for attentive service. I am proud to confirm that banks in Cayman possess an enviable range of products and services to meet the needs and desires of the captive market.
Some of the key banking ingredients found in Cayman are:
Generally, banks in Cayman are well known in the offshore marketplace and boast significant experience and expertise in the re/insurance market. Cayman has been successfully servicing an increasing offshore market - and for much of that time a thriving insurance market - for more than 30 years. What has developed is a solid range of core banking products that are professionally managed and presented with a well-chosen selection of optional services.
Where now? Having chosen the Cayman Islands as your domicile of preference, following the recommendation from a reputable insurance manager should lead you to a shortlist of banking providers. The bank's relationship manager will then assist with the selection of the most suitable products and services. Choose carefully, though - the `one stop shop' is out there.
By Barry J Yetton
A career banker Barry J Yetton, ACIB is head of banking at Bank of Butterfield International (Cayman) Ltd, in Grand Cayman (
www.bankofbutterfield.ky/ ), where he is responsible for retail banking, credit, card services, treasury, and corporate and electronic banking.