CAPTIVEINSIGHT
Cayman Islands
Golden Past, Present
& Brightest Future
by James Rawcliffe
Vice President at Sagicor
Insurance Managers Ltd.
[email protected]
+1(345) 815-0841
www.sagicorcayman.com
T
oday the Cayman Islands stands as the
second largest domicile as regards to
the number of captives and arguably
higher still in perception of client service and
approach to captive insurance regulation.
This article seeks to provide clues from
the past on how Cayman has arrived at its
present position together with some insight
as to Cayman’s prospects for the future.
Early indications of Cayman as an international business
centre can be found in 1967, with William S. Walker
being instrumental in the drafting of the first Trust
Company and Exchange Control Legislation. The growth
of Cayman’s client base was also helped during 1967 by
the early signs under Lynden Pindling’s government of
Bahamas independence from the United Kingdom and the
corresponding migration of its thriving offshore business.
When the government acquired a majority stake in Brac
Airways (renamed Cayman Airways) from Costa Rican
airline LACSA, in 1968, the Islands became more readily
accessible, as well via the development of telex services by
Cable and Wireless.
Two key legislative events helped consolidate Cayman’s
early position. Firstly, the 1971 Currency Law and
subsequent amendments leading to the creation of the
Cayman dollar and then pegging it to the US dollar enhanced
Cayman’s standing as an offshore centre and secondly, the
1972 Constitution which established the UK Privy Council
as the final appellate body, strengthening the independence,
yet solid grounding of the Cayman legal system in the eyes
of clients.
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Captives began arriving in the Cayman Islands in the mid
1970’s, mainly from the Bahamas where a new insurance
premium tax was making captives uncompetitive.
Fred Reiss, considered the “father of captives” formed
Transnational Limited, the first captive management
company, and other major players such as Johnson &
Higgins soon followed. With the growth of captive business
came the need for appropriate legislation and here is where
the captive story really begins. While captives had begun
setting up in the mid 1970’s under general companies law,
this was largely unregulated until the enactment of the new
Insurance Law in 1979 and enforced by Superintendent of
Insurance, John Darwood, whose approach to insurance
regulation was the forerunner of today’s Cayman regulatory
best practice, combining robust regulation with accessibility
to prospective clients and readiness to promote the domicile.
This attracted high quality new captives as well as drove
away several captives of lesser quality. In 1976, the selection
of Cayman over Bermuda by Harvard Medical School for
its captive CRICO gave Cayman instant credibility and thus
began Cayman’s reputation as the leading domicile for the
healthcare sector including hospitals, health authorities and
doctor’s groups. This might not have taken place were it
not for Bermuda’s skepticism at Harvard Medical School
wishing to use its captive for medical malpractice to external
doctors credentialed to use Harvard’s facilities in addition
to its own employed doctors. The growth of the captive
market continued through the 1980’s via hardening rates
in the US insurance market caused by the bankruptcy of
several US property and casualty companies, and in turn this
helped further develop the islands tourism and hospitality
infrastructure with captive board meetings being held and
the real estate market with many of the captive principals
and vendors purchasing real estate property.
The Cayman regulatory framework developed further in 1993
with the formation of the Financial Services Supervision
Department and then combined with the Cayman Islands
Currency Board [