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Cayman Islands: Excellence in a Captive Domicile

The Cayman Islands, the string of jewels set in the azure western Caribbean, has been a preferred domicile for captive insurance companies practically since the first Insurance Law passed in 1979. And while it is doubtful that many of the captives there would cite “history” as the deciding factor in their location, it is inarguable that the results of the Caymans’ 40+ year development as an international finance center weigh heavily in such decisions.

Even taking into account the ever-expanding number of choices of states having captive laws in place today, the Cayman Islands still stands out for many more reasons than just its enviable geography. Cayman’s unique heritage and business-oriented culture, developed intentionally over decades, has fueled the combination of a world-class regulatory environment and support services including international banks, auditors, legal firms to service captive insurance companies that makes for a uniquely desirable domicile.

Cayman’s domicile competitive advantages are driven by the Cayman Islands Monetary Authority, a highly sophisticated and knowledgeable insurance regulator, providing strong proponents of proportional and risk-based regulations, which have been designed in consultation with the insurance industry to provide a robust, but business friendly regulatory environment to respond to a demanding and rapidly changing marketplace.

Proportional risk-based regulations ensure that Cayman’s minimum and prescribed capital requirements are comparable, if not, more competitive than other captive domiciles. In reflection of Cayman’s business friendly regulations, Cayman’s licensing fees are flat rate ranging from US$10,366 to US$12,805 based on license type, with no premium taxes applicable. This can lead to significantly lower operating costs when comparing costs of state premium taxes which are applied by onshore domiciles. There is a similar approach when it comes to applying capital and solvency requirements with insurers writing a minimum of 95% of related business carries a requirement for capital and solvency of US$100,000.

The Cayman Islands’ business reputation rests firmly on a record of political stability, which is reflected in its number one credit rating across the Caribbean. Furthermore, the independence of the Cayman Islands Monetary Authority from the Cayman government provides a significant differentiator from many onshore domiciles, where the state’s insurance commissioner could be replaced by a change in administration reflected in a newly elected governor.

While the Cayman Islands is known for tax neutrality, in which no additional level of taxation is levied by the country’s government, it is worth noting that most captives elect under section 953 (d) of the U.S. tax code to be taxed as U.S. insurance company. Cayman captive insurance companies with U.S. shareholder(s) that choose not to be taxed as a U.S. insurance company will most likely have U.S tax filing requirements for its shareholder(s). The Cayman Islands is an active participant in the OECD global forum on Taxation and Exchange of Information for Tax Purposes and has bi-lateral agreements for the provision of tax information with 56 countries.

Cayman’s competitive advantages has led it to be the number one domicile for healthcare sector captives and with over 650 captive insurance companies it is the second largest captive domicile globally. Total premium written in Cayman is in excess of $21 billion with over 90 percent of risks located in North America.

If you are interested in hearing more about the Cayman Islands as a domicile location, or wish to form a captive insurance company, Atlas Insurance Management (Cayman) Limited can guide you throughout all stages of captive formation and management.

Beth Biega
Vice President
Atlas Insurance Management (Cayman) Limited
Call: 980-279-8995

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