Kane Chronicles (Comment): Capitalising on the capital markets

Kevin Poole

A resilient captive market

Kevin Poole highlights the success of the Cayman captive industry and explains why he expects this success to continue in 2012

The Cayman Islands Monetary Authority recently published their 2011 insurance statistics that show a total of 38 new licenses were issued during the year, an increase of 13 in comparison to 2010 and representing a 52% increase. This means the total number of captives in Cayman at December 31 2011 stood at 738. In addition, assets held increased to $68.51bn ($58.29bn 2010) while premium written also increased to $11.76bn ($9.59bn 2010).

Cayman’s highest number of licensees was in 2009 when the figure stood at 780. However, in 2010 and 2011 CIMA took steps to cancel licenses that had remained dormant for a number of years or where the formal regulatory cancellation process needed to be completed. This move effectively cleaned out any regulatory ‘dead wood’ and has left Cayman in a good position to continue to grow its captive market, while also enabling the Insurance Division to focus its resources on active licensees.

It is interesting, when looking at the Cayman finance sector, to note how resilient the captive market has been during the recent economic downturn as other industries such as hedge funds have suffered – although these are beginning to bounce back now. Many captives have successfully built strong balance sheets over many years and this has even enabled them to assist their parent companies with dividends, short-term loans and in some cases premium holidays during this time of economic downturn.

As we now enter 2012, we believe the Cayman captive market will continue to see growth. Given the healthcare sector makes up 35% of Cayman’s licensees, developments in this industry are important to consider.

For example, consolidation in the healthcare industry is seeing hospitals acquire both other hospitals and physician groups, which results in increased exposures requiring cover. Also, while healthcare is still enjoying a soft market other exposures such as property and some casualty lines are starting to see markets harden, and as a result captive growth is expected to follow.

One other area that Cayman has been traditionally strong in is the capital markets with ILS and cat bond transactions expected to grow in 2012 as investors look for an enhanced investment yield and sponsors seek capacity. Kane has held a lead position in this sector since the very inception of the market some 15 year ago, and we will continue to expand our capabilities to support this growing area.

In our view, the growth in captive numbers in 2011 and the forecast growth in 2012, coupled with the continued strengthening of the ILS sector, provide a clear and positive endorsement of the global standing of Cayman.

Kevin Poole, Manager, Kane (Cayman) Limited
Email: kevin.poole@kane-group.com