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Cayman continues to set the pace as a global captive domicile, as the Cayman Islands Monetary Authority (CIMA) takes definite steps to maintain the Islands’ competitive edge. A significant move has been CIMA’s decision to opt out of Solvency II equivalence—at least for the time being—which will enable Cayman-based captives to avoid those prescriptive regulatory measures emanating from Europe. The captive industry in Cayman is hoping that such an approach will play to the strengths of the Islands’ existing captive bench: lean, pared down entities that provide risk transfer capacity to their parents, but without significant regulatory and administrative burden. It seems that Cayman is not alone in its view on opting out of Solvency II. Other, smaller domiciles are making similar noises.
Just how the final shape of Solvency II will look is still a matter of some debate, but Cayman—with its emphasis upon captive insurance—has evidently decided that a wait and see approach to how exactly the European Insurance and Occupational Pensions Authority intends to treat captives within the framework of Solvency II is the way to go. And Cayman’s results for 2011 formations appear to support its decision, with record levels of new captives opting for the Islands’ shores in recent months. Much of this new interest will be down to Cayman’s existing strengths. Its position vis-a-vis Solvency II has probably also helped.
It isn’t just opting out of Solvency II equivalence that has helped to strengthen Cayman’s position. The Cayman Islands’ recently signed Insurance Law, which is due to come into force at the end of 2011, will help to provide further clarity and proportionality to the reinsurance, insurance and captive sectors, acting as a further driver for formations. In addition, the signing of a tax information exchange agreement (TIEA) with Canada—bringing the number of bilateral TIEAs signed by Cayman to 27—has provided further impetus to new formations from North America. Such developments are likely further to cement Cayman’s position as a leading captive domicile increasingly at the vanguard of international developments.
Cayman continues to plot a successful course, navigating its way through the demands of issues such as the Foreign Account Tax Compliance Act and the Dodd-Frank Act, with its captive industry and regulator deftly positioning the jurisdiction to achieve future growth. In all, 2011 has been a good year for Cayman’s captive sector. Expectations for 2012 are understandably buoyant.
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