November 26, 2020

Bush plans to lure reinsurers

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Cayman Premier McKeeva Bush has unveiled immigration incentives and a targeted marketing campaign expressly designed to encourage reinsurers to domicile in that Caribbean jurisdiction rather than in Bermuda.

During the Cayman Captive Forum last week, Mr. Bush used the largest captive insurance conference in the world — with 1,200 delegates attending — as the venue for a new strategy aimed squarely at the reinsurance industry in Bermuda.

Mr. Bush said that while growth in the Caribbean island chain’s captive insurance arena has been strong, reinsurance activity has been limited.

“Anecdotal evidence from the industry suggests that as a jurisdiction Cayman has several advantages that we can capitalise on to attract greater interest from reinsurance companies,” Mr. Bush said.

In addition to new insurance legislation — which has given the islands a framework to increase reinsurance activity in the region — Cayman also needed to offer a package of immigration incentives to facilitate the ease of entry by the specialised staff needed in this industry and a targeted marketing campaign that will educate and attract potential reinsurance business on the benefits of Cayman, Mr. Bush said.

Senior executives who would be granted 10-year work permits are the positions of vice president or higher, Mr. Bush said.

In addition, Mr. Bush said direct one-on-one marketing to reinsurance chief executive officers and senior executives, as well as presentations to law firms in New York and other financial centres, will be needed to drive reinsurance business to Cayman.

Mr. Bush said Cayman’s advantages when attracting reinsurers include no income, payroll, property or corporate taxes. “As long as I am premier, there will be no such taxes,” Mr. Bush said.

Compared to Bermuda, one of the main domiciles for reinsurers,  Mr. Bush said Cayman offers an attractive jurisdiction to work and reside and provides expatriate workers with the opportunity to own property. Labour costs in the reinsurance industry are also lower than in Bermuda.

Bermuda historically enjoyed the advantage of a tax treaty with the US, which came into effect in 1986 and governs the taxation of insurance premiums.

“Bermuda’s proximity to financial centres such as New York and London with daily direct flights to each also gives Bermuda a bit of a geographic edge. However the Cayman Islands government’s vision to implement ways to cut through bureaucratic red tape to facilitate business needs plus the quality of life should greatly assist in attracting commercial reinsurers,” Mr. Price said.

Another significant difference between the two jurisdictions is that Bermuda is seeking third party equivalence  with Solvency II, a fundamental review of the capital adequacy regime for the insurance industry developed in the European Union.

Solvency II is expected to increase demand for reinsurance as one of the tools for insurance companies to lower their additional capital requirements as a result of the new rules. However, reinsurers themselves face higher capital requirements and capital costs under Solvency II.

Cayman has not adopted the new rules and has not committed to do so in the future, which could be attractive to certain reinsurers looking for a domicile with a lower capital threshold.

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