Some two years after passage through the legislative assembly, the regulations to the Cayman Islands Insurance Law have finally been approved by Cabinet.

The law makes a number of changes to the regulatory regime for insurance companies in the Cayman Islands and finally recognises reinsurance companies, who were previously formed and regulated under rules intended for captives. (Yes, the statutory minimum capital requirement for a reinsurance company writing a billion dollars in premium would have been US$120,000!).



The 64 million dollar question is this: will the new regulatory regime result in an increase in reinsurance business conducted in Cayman? Not likely, at least in the short term.

The Cayman Islands has long had its sights set on reinsurance business as one of the most lucrative sectors in offshore financial services, and one thus far concentrated in competing international financial centre Bermuda. A press release issued by the Association of Bermuda Insurers and Reinsurers (ABIR) in 2010 cited an Economic Impact Study commissioned by the group as showing that its 22 members directly contributed some US$950 million to the Bermuda economy. As I’ve previously noted that is more than the economic contribution of Cayman’s entire financial services industry.

While anecdotal evidence suggests that number will already have declined somewhat since 2010, rumblings in the industry indicate a high degree of disaffection among reinsurance companies and an appetite for a change of scenery, particularly among senior executives weary of the ever-increasing cost and awkwardness of doing business in Bermuda.

Adding weight to Cayman’s value regulatory proposition for reinsurance companies (announced recently and conspicuously timed to coincide with the new regs) is a package of immigration concessions offering ten year work permits, permanent residency (with a pathway to citizenship) and even a waiver from work permit fees for an extended period.

Whether all this will amount to a hill of beans is unclear. A company’s success is not just related to the quality of its product, but to its business acquisition (aka sales) strategy. While Cayman may have taken steps to improve the product, its sales strategy and infrastructure are not merely lackluster, they are non-existent.