Cayman Islands Financial Services

In his New Year’s address, McKeeva Bush, the Premier of the Cayman Islands, has noted that the jurisdiction is planning attract additional investment as a result of the Cayman Enterprise City – the 1st special economic zone in the Caribbean. This means that companies will be admitted this month.

According to Bush, the Cayman Enterprise City has made a noticeable progress since the signing of a Memorandum of Understanding between the government and the organisers 11 months ago.

Bush said that the extraordinary progress by CEC stakeholders has meant that the CEC zone is now operational. In September 2011, the Special Economic Zones Law was passed by the legislative assembly. The 1st meeting of the Special Economic Zone Authority was held in the end of December. It has confirmed that it is prepared to license the 1st zone companies in January 2012.

Investors located in the zone have the following benefits:
• exemptions from income tax;
• exemptions from corporate tax;
• exemptions from capital gains tax;
• exemptions from tax on the repatriation of capital and profits;
• exemptions from work permits;
• companies will be permitted to be 100% foreign owned.

In the recent Hedge Funds Review’s Service Provider Rankings, the Cayman Islands was named as the most favoured hedge fund domicile.

The survey revealed that the Cayman Islands is the most favoured domicile in terms of the quality of service provided by local practitioners. The Cayman Islands was ranked as the top domicile by 52.9% of the survey respondents.

The jurisdiction is followed by Luxembourg and Ireland.

The results of the survey were based on the opinions of more than 1 000 hedge funds, funds of hedge funds and investors who invest into hedge funds, or asset managers allocating to hedge funds and funds of hedge funds.

The Chairman of Cayman Finance, Richard Coles, welcomed the findings of the survey, saying: “It is welcome yet unsurprising news that the Cayman Islands was named the most favoured domicile in the recent Hedge Funds Review’s Service Provider Rankings. The survey underscores Cayman’s ongoing relevance in the worldwide financial industry and role as a key player in the funds industry in particular.”

Cayman Premier McKeeva Bush has announced plans to introduce a streamlined work permit regime aimed at encouraging reinsurance business to the Cayman Islands.

At the recent Cayman Captive Forum, Bush noted that the Cayman government would introduce a number of incentives for reinsurance businesses. The incentives are 10-year work permits for senior executives of companies and reduced work permit fees.

When announcing the incoming regime, Bush indicated, in contrast to other offshore jurisdictions like Bermuda, the Cayman Islands will not seek equivalency with the EU’s stringent capital adequacy requirements under Solvency II, providing appeal for reinsurers seeking to bypass the strict capital controls.

A 93%-increase in captive insurance company formations has been reported by the Cayman Islands Monetary Authority (CIMA) during the 1st 9 months of 2011, as compared to the same period in 2010.

CIMA published statistics revealing that a total of 29 captive insurance companies set up operations in the Cayman Islands during 2011, which is an increase from 14 in the 1st 3 quarters of 2010. This growth reflects the continued resilience of captive insurance sector in the Cayman Islands.

Total premiums breached records, which amounted to USD 9.6 billion as at September 30, a 12%-increase on that recorded at the end of 2010. Total assets have grown only marginally since the beginning of the year, to USD 58.3 billion.

According to CIMA’s Managing Director, Cindy Scotland, “This 93% increase in captive formations and close to USD 10 billion in premiums are indicators of the health of our captive insurance industry, despite the generally soft international insurance market conditions. In all of 2010 there were 25 new captives formed, so for our 2011 numbers to already be at 29, and with new applications pending, we anticipate this calendar year to reflect significant growth in new captives.”

It was noted by the statistics that the Cayman Islands has remained the leading jurisdiction for health care captives. As at September 2011, health care was the primary line of business for 256 companies (35%).

It has been discussed that a recent report named the Cayman Islands the world’s 2nd most secretive finance jurisdiction. This has led Cayman industry insider to call for a better defence against “those who would bury places like Cayman”.

The ex-chairman of the Cayman Islands Monetary Authority (CIMA), Tim Ridley has spoken to comment on the publication of the Tax Justice Network ‘s (TJN) Secrecy Index that accused the offshore jurisdiction of making “shallow efforts” in cracking down on fiscal evasion.

Mr Ridley said: “The recent, highly subjective and somewhat ‘short on substance’ secrecy report by the Tax Justice Network underscores how essential it is that Cayman presents the accurate position whenever and wherever possible and to those that matter”. He stated that “those who would bury places like Cayman are in deadly earnest”, so the future of Cayman financial services industry is at stake.

Carlos de Serpa Pimentel, chairman of STEP Cayman Islands, suggested that the Cayman Island’s dealings as an offshore jurisidiction actually helped the world’s economy by providing a tax neutral platform for international transactions. “In other words, the existence of Cayman facilitates the workings of the world’s financial system and makes it more efficient,” he said.

According to British newspaper Morning Star, tax activists drew their attention to the Cayman Islands. They demanded that Britain bring the jurisdiction, which they called one of the world’s biggest tax havens, to account.

The Tax Justice Network’s financial secrecy index said that the Cayman Islands is one of the world’s most secretive financial centres. The jurisdiction is one of British Overseas Territories having economic autonomy. According to Morning Star, income or corporate taxes has made them the hedge fund capital of the world, with more than 90 000 companies doing their business through this offshore jurisdiction. A study of 72 countries revealed that the Cayman Islands is the 2nd most secretive nation (the 1st is Switzerland).

On October 4, a separate report was released that accused the offshore jurisdiction of playing a “key role” in the 2008 global financial crisis. The report said: “Cayman’s relaxed funds law served as the bedrock of the hedge fund industry which now sees Cayman as its top domicile. It also saw Cayman attract a very large share of major new sectors in financial engineering such as private equity, debt and bond issues and securitisation”.

In February 2011, Barclays admitted to using Cayman subsidiaries to slash its tax bill to 1%. Barclays chief executive Bob Diamond said that the bank had used at least 181 offshore subsidiaries in the Cayman Islands to cull its tax burden to just GBP 113 million despite racking up GBP 11.6 billion in annual profits.

On September 12, it was announced by Consolidated Water Co. Ltd. (NASDAQ: CWCO) that the Board of Directors has declared a quarterly cash dividend of USD 0.075 per share.

The dividend is payable October 31, 2011 to shareholders of record at the close of business October 1, 2011.

Consolidated Water Co., the company that develops and operates seawater desalination plants and water distribution systems where natural supplies of potable water are scarce or nonexistent, operates water production and distribution facilities in the Cayman Islands, as well as the BVI, Belize, and the Bahamas.

The Company was established in 1973 as a private water utility in Grand Cayman and obtained its first public utility license in the jurisdiction in 1979.

Offshore Incorporations Limited (OIL) is opening its first European office in London. This leading global company formation specialist based in Asia commented that the move will allow to further support Asia-based companies which increasingly require international structures to facilitate strong capital flows from Asia to Europe.

Offshore Incorporations Limited serves professional intermediaries. The company specializes in offshore company formation the Cayman Islands as well as Anguilla, the Bahamas, the British Virgin Islands, Delaware, Hong Kong, Mauritius, Samoa, the Seychelles and Singapore.

CEO for OIL, Martin Crawford, said that this is the 1st step aimed to expand OIL’s presence across Europe and it is an exciting milestone for the business that has just celebrated 25 years in Asia. He said: “We wish to continue supporting our clients as they grow globally and require a wider variety of services for their offshore activities. You just need to look at the fact that over 50% of new properties in London are purchased by Asian investors to see the growth in demand.”

Companies residing in the Cayman Islands and Luxembourg have been hit with a tax bill of more than $738 million as the Australian Tax Office (ATO) sharpens its focus on the private equity firm behind the 2009 float of the retailer Myer.

In accordance with the documents filed in the Federal Court, the Tax Office has demanded more details about Texas Pacific Group’s Australian operations and who issued its local head, Ben Gray, with instructions relating to the offshore chain of ownership that controlled Myer from 2006 until 2009.

The Tax Office contends that after pocketing $1.5 billion of Myer float proceeds in November 2009, the Cayman Islands-based TPG Newbridge Myer Ltd and Luxembourg-based NB Queen SARL should have paid $452 million in income tax.

The Tax Office has issued the assessments for companies that demand the outstanding $452 million plus $226.12 million in penalties and $60.49 million interest.
Proceeds from the Myer float were channeled through a corporate structure that spanned 4 jurisdictions: from Australia the funds moved to NB Swanston BV in the Netherlands, then to its parent company, NB Queen in Luxembourg, which transferred the proceeds to TPG Newbridge in the Cayman Islands.

The ATO obtained a Victorian Supreme Court order freezing TPG’s bank account in Melbourne, but this account had already been drained.

Now the Australian Tax Office has obtained fresh orders from Justice John Middleton in the Federal Court clearing the way for it to leave notices of demand at the South Yarra home of Mr Gray, the chief executive of TPG in Australia.

The Australian Tax Office has already demanded details from Gray about the ownership of the Cayman-registered company. According to correspondence released by the court, Gray told the ATO that the Cayman Islands company was owned by 3 funds: NB Asia IV (51.7%), TPG IV (34.5%) and Blum Capital (13.8%).

As part of its global expansion strategy, Investors Trust Assurance SPC has recently joined the Association of International Life Offices (AILO), a non-profit organization comprised of the most important companies of the international insurance industry, based predominantly in financial centres within the European Economic Area and UK Crown Dependencies, such as the Cayman Islands. AILO will be a valuable resource to allow Investors Trust to successfully approach potential markets in Europe, Middle East and Asia.

Investors Trust is an insurance company registered in the Cayman Islands. It offers unit-linked and fixed income investment products to middle market investors worldwide.

The AILO organization has been the main trade consultant for the international financial services industry since 1987. It represents the interests of this particular sector. This international insurance company is licensed and regulated by the CIMA.

Investors Trust will be participating in the next annual general meeting scheduled for October 2011, which will take place in London, which will provide it with an opportunity to share experiences and new challenges as well as to meet colleagues and competitors.