The Cayman Islands' captive industry has come off a strong year in 1994, with the licensing of 45 new captives. "We have had the busiest year in offshore activity ever," says John Darwood, insurance superintendent for the Cayman Islands. As of early January of this year, the Cayman Islands have 358 captives in operation.
To a large extent, the Cayman's popularity as a domicile is due to regulatory flexibility, which particularly suits health care captives, the single largest type of captive business on the islands. "These health care-related businesses include hospital groups, doctor associations and a variety of other programs," says Mr. Darwood. "Coverages written span the spectrum, from medical malpractice to workers' compensation programs." The Cayman is also politically stable which, of course, greatly contributes to an efficient and effective insurance and business environment.
In the past, parents of health care captives, particularly those that write medical malpractice coverage, selected the Cayman Islands as their domicile because neighboring Bermuda would not permit nonemployed physician exposures to be covered within their captive programs says Tom Hermes, senior principal at Tillinghast in Hartford, Connecticut. Although Bermuda has since amended of health care captives remain in the Cayman because the regulators' familiarity with this type of captive allows for more streamlined and user-friendly regulatory and licensing procedures. Also, the Cayman's typically low operating costs have remained a strong magnet for new business.
Offshore companies interested in doing business in the Cayman Islands can apply for one of two types of license, according to Captive Insurance Company Reports, published by Tillinghast. The first, a restricted B license, is for those companies that will only insure themselves or their shareholders. …