The Cayman Islands is emerging as an alternative to Bermuda for reinsurers and captives, according to Adrian Lynch, CEO at Blue Ocean Reinsurance Group.
Bermuda had long been the largest captive domicile in the world but was recently overtaken by Vermont by number of captives, though it still remains the largest offshore jurisdiction.
“Cayman is emerging as an alternative to Bermuda, and a number of the conversations we’re having are with carriers who already have an operation in Bermuda who are looking to perhaps have some regulatory arbitrage or looking to mitigate some of their risks by having an office in both jurisdictions,” Lynch told Captive Intelligence.
Lynch said Cayman has a reputation jurisdictionally as being very “well served”.
“The insurance management space, the audit space, the legal space, the regulatory space, and all of those factors as a combination, make the jurisdiction quite attractive,” he said.
The number of pure captives domiciled in Cayman is reached 286 at the end of 2023, an increase of nine compared to 2022, while there was 127 group captives and 154 Segregated Portfolio Companies (SPCs).
Lynch said the growth of captives in Cayman shows that underwriting standards and cost of capital has become an important issue.
“Certain companies are looking internally in terms of how they allocate capital, and quite frankly, in terms of their own risk management and their own risk appetite,” he said.
“Alternative risk financing for an organisation internally has become something that they’ve become more skilled at and more comfortable with and, as a result, captives are seeing growth in terms of extra lines of business being added.”
It has been well documented that a number of US captive owners have looked to re-domesticate their captives onshore and there was a concern this will impact offshore domiciles.
Lynch said that most US domiciles have active captive legislation, and each will have a story to tell about a captive that has redomiciled from an offshore jurisdiction back onshore.
But he added that for every captive re-domesticating to the United States, there is likely to be some going in the other direction.
“Every state would have its own reasons and its own incentives to try and get companies back onshore, and that’s why a jurisdiction like Cayman needs to remain innovative, needs to be ahead of the curve, and needs to be pre-empting.”
Lynch told Captive Intelligence last week that there was a gap in the Cayman for Blue Ocean Re after he recently launched the company.