Captive forum highlights growth in face of
hurricanes
Monday, December 12, 2005
Standing at $26.5 billion, the assets of the captive
insurance companies registered in the Cayman Islands exceeds the estimated
property damage of $22.7 billion in Louisiana from Hurricane Katrina, the
largest recorded natural disaster in the US.
This number demonstrates the enormous asset value of the
captive industry in Cayman and represents a 37 percent increase in assets in
less than two years and the industry shows no signs of slowing down.
Over 500 people attended the 2005 Cayman Captive Forum,
which covered topics affecting the industry including the very active
hurricane season, healthcare trends, growth opportunities, group captives and
the current marketplace. The forum took place at the Westin Casuarina Resort
and Spa from 6 through 8 December.
The Head of Insurance at the Cayman Islands Monetary
Authority, Marylou Gallegos, reviewed the issues affecting the insurance
industry in the past year.
“We have watched as the number of insured losses reported
by the industry have climbed into the billions,” said Ms Gallegos.
“We have watched as the rating agencies placed companies
on their various watch lists and we have waited with bated breath at the
possibility of the cat bonds being triggered and as we know - 2005 is the now
the worst year on record for the energy insurers.
“Don’t lose sight of the possibility of an avian flu
pandemic if human to human transmission does emerge there. The life industry
will have a hard time determining exposure to that one.
“We might say it will likely start in highly populated
areas where life and health insurance is not prevalent but what about those
affluent, healthy policyholders who are jet setting around the globe? And what
about the possibility of our hospitals getting sued for insufficient
quarantine facilities?”
Ms Gallegos explained that a working group has been
established to review the insurance law with the goal of bringing it up to
date with international standards.
“From the captive industry’s perspective, there will be
no surprises and no major changes,” said Ms Gallegos.
She noted that 52 new captive insurance companies were
licensed so far this year, bringing the total to 727 captives and $6.7 billion
in premiums. These new companies were primarily healthcare related, with the
others consisting of workers compensation, general liability, auto liability
and property.
The Leader of Government Business, Hon Kurt Tibbetts,
reviewed the country’s recovery in the past year from Hurricane Ivan,
emphasising the stability and reliability of doing business in this
jurisdiction.
“Many barriers stood in the way of recovery, but I can
easily say that it was the financial sector which claimed the first success in
the recovery effort,” said Mr Tibbetts.
“Mere days after the impact of the storm, our financial
sector was operational, hardly missing a beat. This was thanks in large part
to sound disaster mitigation procedures on their part and a determination to
get back to business as usual. It is for this reason the Cayman Islands has
achieved and continued to hold the distinction as the world’s fifth largest
financial centre.”
Meteorologist and hurricane expert Steve Drews was one of
the many highlights of the forum as he explained the lifecycle of Hurricane
Katrina as it marched across the Caribbean and the Gulf of Mexico, and hitting
Florida, Louisiana, Mississippi and Alabama with spin- off tornados affecting
Georgia. Furthermore, 2006 is expected to be another record-breaking year for
hurricane activity, nearly double normal activity according to research by
Colorado State University with an estimated 17 named storms and nine
hurricanes.
“Could we see another major hurricane hit New Orleans?”
said Mr Drews. “The eastern coast of the US has fared fairly well in the last
couple years. Could we see a major hurricane hit the eastern coast? Yes. Could
we see a major hurricane hit New York City? Yes.
“The key is in contingency plans, and better forecasting
to mitigate these disasters. This will help us serve our clients better and
prepare for the worst case scenarios.”
Mr Drews said he expected insurance rates to increase
next year anywhere from 10 percent and higher, even in areas that are well out
of the hurricane belt.
This however will mean more growth opportunity for the
captive market, because high insurance rates will drive more companies and
groups to consider captive insurance according to industry experts.
By Shurna Robbins
shurna@caymannetnews.com
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