Cayman Islands Financial Services

On May 1, 2012, Bloomberg speaker, Patrick Schwerdtfeger, will present his signature program called “Social Media Victories” at the Cayman Islands Tourism Exchange (CITE).

The annual event will be held on Grand Cayman. The forum attracts leading tourism suppliers and travel wholesalers from around the world.

Part of the CITE forum will focus on social media and how tourism professionals can use it to promote destinations like the Cayman Islands.

The CITE is the only annual forum for leading suppliers of the Cayman Islands tourism industry to meet with travel wholesalers from the United States, the United Kingdom, Europe and Canada in a professionally organized business exchange. The event is organized by the Cayman Islands Tourism Association (CITA).

Cayman Enterprise City (CEC) has officially signed a memorandum of understanding with the Dubai Multi Commodities Centre (DMCC) with a view to establish mutually beneficial trade opportunities between the two Freezones.

Following a visit from the CEC to Dubai, UAE, to strengthen trade relations between the United Arab Emirates and the Cayman Islands, CEC has officially signed the above-mantioned document. The agreement signed in November by CEC Chief Executive Officer, Jason Blick and His Excellency Ahmed Bin Sulayem, the Chairman of the DMCC, represents the first major step by CEC to establish the zone internationally through this strategic partnership.

Speaking on the Memorandum of Understanding, CEC Chief Executive Officer Jason Blick said, “The agreement with the DMCC creates a tremendous opportunity for both CEC and the DMCC. By enabling companies to establish in the DMCC and Cayman Enterprise City, we are creating a unique environment for the commodities sector in the Americas and the clients governed by DMCC that can allow the rapid opening of new markets and let companies manage those opportunities successfully.”

The signing of the memorandum of understanding represents the fulfillment of an early part of the CEC vision, to connect the Cayman Islands to established and emerging markets worldwide, and the selection of Dubai as a trade partner is an extension of the earlier trip to the UAE in March 2011 by CEC and a Cayman Islands delegation led by Honorable W. McKeeva Bush, Premier of the Cayman Islands.

Blick said that Dubai is well-known for the world’s most successful Freezones that have completely transformed the local economy and are populated by blue-chip companies from all over the world. So, connecting with Dubai was an integral part of our vision, to gain from their experience while also creating the flow of capital between the two jurisdictions. He added: “We are immensely pleased to realise this agreement, as it shows that the world is interested in what we are doing in Cayman, and brings the success from the Premier’s visit last year”.

Following the ratification of legislation and the establishment of the Cayman Special Economic Zone (SEZA), CEC has officially begun operations and has begun issuing Trade Certificates.

The United States Securities and Exchange Commission (SEC) has announced that it has established a memorandum of understanding (MoU) with the Cayman Islands Monetary Authority (CIMA) as part of its long-term strategy to improve the oversight of regulated entities that operate across national borders.

SEC’s supervisory cooperation arrangement is meant to enhance its ability to share information about regulated entities, such as investment advisers, investment fund managers, broker-dealers and credit rating agencies. It establishes mechanisms for continuous and on-going consultation, cooperation and the exchange of supervisory information related to the oversight of globally active firms and markets.

The SEC attaches particular importance to the Cayman Islands as a major offshore financial centre and home to large numbers of hedge funds, investment advisers and investment managers that frequently access the US market, while ESMA fosters regulatory convergence among EU securities regulators.

The Cayman Islands has announced that it is expanding an airport with a view to allow direct flights from Cayman Brac to the United States.

According to Airport Authority marketing manager Caren Thompson-Palacio, the expansion of the Gerrar-Smith International Airport is expected to boost tourism on the island. The construction should start in the next couple of months but an estimated cost for the project is not known yet.

Currently, travelers going from Cayman Brac to Miami must stop first in Grand Cayman as the smaller airport lacks adequate passenger screening facilities.

On March 7, 2012, AMP Electric Vehicles, an electric vehicle company specializing in truck conversions, signed a memorandum of understanding with U-Go Stations Cayman LTD. with a view to distribute all-electric SUVs to the Caribbean Islands. U-Go Stations Cayman will become AMP’s second international distributor.

In early January of 2012 at North American Auto Show AMP announced its first US dealership, AMP of Cincinnati.

Jim Taylor, AMP CEO, said that “the combination of the near perfect weather conditions of the Caribbean Islands, the high cost of gasoline, the inherent short commutes of an island community and the desire to reduce dependence on foreign oil makes for an outstanding scenario for our EV’s”.

The agreement gives U-Go Stations Cayman the exclusive retail and fleet distribution rights in the Cayman Islands as well as in the Bahamas, Bermuda, Jamaica, St John, St Thomas, St Kitt, and Barbados.

AMP plans to deliver its first Electric SUV to U-Go Stations Cayman for use in their EV auto show. The event is scheduled for the summer of 2012 in Grand Cayman.

Cayman Enterprise City (CEC) is the first Special Economic Zone (SEZ) of its kind in the Caribbean region, is now open for business and welcoming its first clients.

The official launch of the Special Economic Zone was observed at a celebration attended by His Excellency the Governor of the Cayman Islands Mr. Duncan Taylor, Cayman Islands Premier, the Honorable McKeeva Bush, CEC executives and prominent business and community leaders.

It should be reminded that the Premier signed a Memorandum of Understanding in January 2011. The document allows the CEC Development company exclusive rights to develop and operate a SEZ with a view to attract internet, technology, commodities and derivatives, media, and biotechnology companies from around the globe.

At the launch event, Premier Bush commented on the expedited process that resulted in the timely launch. He said: “It is an incredible accomplishment when we consider how much the elected government, the civil service and Cayman Enterprise City have achieved together in 12 short months to make this project a reality”. Also, he added that the SEZ Law was passed by the Legislative Assembly in September 2011 and the Special Economic Zone Authority was established shortly after that. In December 2011, the newly-established Authority held its first meeting and is now licensing the first zone companies.

“The cooperation and pro-business attitude of the Cayman Islands government and the civil service has been outstanding,” noted Cayman Enterprise City CEO Jason Blick. He added: “They truly understand the positive effect the zone will have on Cayman, and their support has been incredible.”

Cayman Enterprise City is expected to develop into the third pillar of the Cayman economy, alongside financial services and tourism, by attracting new technology based industries and global brands into establishing a physical presence in the Cayman Islands.

It is worth noting that a February Moody’s Investors Service report stated that Cayman Enterprise City is an important and credit positive diversification opportunity for the economy of the small island jurisdiction.

The number of captive insurance companies that have been established in the Cayman Islands increased significantly during 2011. According to the Managing Director of the Cayman Islands Monetary Authority (CIMA) Cindy Scotland, this trend is expected to continue into 2012.

Scotland commented that conditions in the international marketplace have been challenging to the formation of captives over the past several years. However, she noted that there continues to be solid interest in the Cayman Islands that was revealed in a 52% increase in captive formations in 2011.

The Authority ended 2011 with 739 captives and 632 segregated portfolios incorporated in the Cayman Islands.

The jurisdiction continued to be the leader for healthcare captives, which was the primary line of business for 256 companies – 35% of the total. The second largest line of business remained workers’ compensation, which was with 161 companies or 22% providing this as their primary type of risk insured.

As at December 31, 2011, the 739 active captives comprise the following: 419 pure captives (57%), 124 segregated portfolio companies (17%), 75 group captives (10%), 52 association captives (7%), 36 special purpose vehicles (5%), 32 open market insurers (4%) and 1 rent-a-captive.

Gordon Rowell, Head of Insurance at CIMA, said: “In some cases this has dampened corporate sponsors’ motivation to take on the expense of setting up a captive in order to self-insure. Nevertheless, industry players know the value of captives as a major part of organisations’ risk management strategy. The industry has established a track record for robust risk management and in recent years captives and insurance managers have been quite efficient at maximising value despite the soft market.”

Scotland noted: “Given these factors, captive sponsors are seeking the greatest efficiencies and the choice of domicile for a captive becomes critical in achieving this value. The Cayman Islands has fared well because of a number of advantages. Captive participants have told us that in addition to the expertise of local service providers who have built up specialization, especially in the area of health care captive structuring, the jurisdiction is very cost competitive, the process for establishment of the captive is efficient, and the legislative and regulatory framework is stable and robust.”

According to a new report entitled United Kingdom and Cayman Islands Relationship Review, the United Kingdom must do more to support the Cayman Islands as well as help dispel myths like “it is an ideal tax haven for terrorists and drug traffickers”.

This report was based on a public consultation with the people of the Cayman Islands. The study revealed that loyalty to the Crown is still strong, however, there is dissatisfaction among the people.

The feedback will be used by the government of the United Kingdom to prepare a new white paper outlining the UK’s strategy for the Overseas Territories.

The biggest concern among Caymanians was the deterioration in relations with the UK. It was said in the report that “The dissatisfaction with the way in which the relationship is presently operating has largely coalesced around the perception that the two parties have often appeared to be at ‘loggerheads’ with one-another and that as a consequence, the Cayman Islands may simply be left to ‘sink or swim”.

“Thus, when the Cayman Islands came under pressure from the international financial community, there seems, amongst several contributors, a sense that the Cayman Islands was let down by a failure on the part of the United Kingdom Government to fully represent the interests of the Cayman Islands and indeed protect these where necessary.”

To remind, the Cayman Islands was criticised as being the second most secretive finance jurisdiction worldwide by a Tax Justice Network (TJN) report in October 2011.

The report highlighted the need to diversify away from the two current main areas of economic activity – tourism and financial services, both of which have come under significant pressure in the wake of the world’s economic recession. According to the United Kingdom and Cayman Islands Relationship Review, “The Cayman Islands needs a long term economic strategy to ensure a stable source of revenue as well as a strategy to diversify away from the two current pillars of economic activity. Also, the report said that the jurisdiction needs a comprehensive long-term strategy to ensure that its tourism and financial services continue to thrive.

The Cayman Islands’ adherence to global regulatory and supervisory standards on international cooperation and information exchange has been found “sufficiently strong” by the Financial Stability Board (FSB). This was revealed in a report commissioned by the G20. It is worth mentioning that “sufficiently strong” is the highest assessment possible.

The FSB, a supranational body whose membership includes the OECD and the Committee on the Global Financial System, suggested that the Cayman Islands is one of 41 jurisdictions that, in the most recent International Monetary Fund-World Bank assessment reports, was determined to be compliant or largely compliant with all, except one, of the relevant cooperation and information exchange standards. As many as 61 jurisdictions were evaluated by the FSB.

According to Premier and Minister for Finance, McKeeva Bush, the FSB’s conclusions on the Cayman regime are a “robust affirmation that the jurisdiction is well-respected, and a good place to conduct business”. He also noted that, in terms of cooperation, the jurisdiction is placed alongside the giant economies of the G7 and G20 countries.

Chairman of the CIMA, George McCarthy, added that the assessment validates the extensive focus placed by the Cayman Islands on international cooperation and involvement in regulatory matters. He said that CIMA has put significant resources to ensure that the offshore jurisdiction meets international standards that relate to all the sectors we supervise.

The Maritime Authority of the Cayman Islands (MACI) is introducing a new Annual Tonnage Fee (ATF) structure, to become effective on January 1, 2012.

With a view to remain competitive with other jurisdictions, a detailed investigation has been carried out by the Maritime Authority of its current ATF system. It particularly focus on comparison with the other key jurisdictions. The net result of this exercise will be a simplified and very competitive structure which provides 2 different formulations, one for merchant vessels and one for pleasure yachts, including those engaged in trade.

According to MACI, the new structure will benefit its clients as well as ensure that the Cayman Islands remain an attractive place for ship registration.