Cayman Islands Financial Services

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.

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.

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.

Security authorities of the Cayman Islands are beefing up customs security at all entrance points because of rising fears that criminal and narcotics gangs from other regional locations are targeting this Caribbean territory.

As armed drug gangs relocate to the area in response to a vigorous crackdown on their activities by the US, Mexico, Colombia and other countries, neighboring territories in the Caribbean and Latin America are facing increased criminal activity.

Canadian security technology firm Smiths Detection will provide the jurisdiction with the tougher customs entry measures. According to Smiths Detection, the contract covering the service was its largest so far with the Cayman Islands Customs Department.

Cayman Finance, a private-sector membership-based organisation that promotes Cayman’s financial services industry through public relations, public affairs and marketing initiatives has announced that Richard Coles has been voted in as its incoming chairman.

Coles is former Attorney General for the Cayman Islands with an impressive resume. He is currently an independent director for hedge funds, structured finance vehicles and investment and financial sector companies and had built a successful law firm in England before he moved to the Cayman Islands. So, he should be a good leader for Cayman Finance, which is the voice of Cayman’s financial services industry.

At an annual general meeting of Cayman Finance held on April 13, 2011, Coles was talking about his commitment and his capabilities to further develop Cayman Finance’s relationship with the Cayman Government.

Also, a new board was elected. The directors of Cayman Finance are Peter Cockhill (Ogier), Nick Freeland (PWC), Gonzalo Jalles (HSBC), Mark Lewis (Walkers), Roy McTaggart (KPMG), Conor O’Dea (Butterfield), David Roberts (Cayman Management), Daniel Scott (Ernst & Young), Henry Smith (Maples and Calder), Ian Wight (Deloitte).

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Complaints Commissioner of the Cayman Islands, Nicola Williams, is currently visiting the Office of the Ombudsman in Gibraltar in order to acquaint herself with the working of an ombudsman of similar jurisdiction and level as her own.

During her short stay, Williams will have meetings with the Minister for Social Services and the Mayor. Also, she will have a Tour of the Rock.

Before her appointment, Ms Williams was 1 of 15 commissioners with the UK’s Independent Police Complaints Commission. She was in charge with investigating, mediating and resolving complaints about police misconduct. Also, she has 16 years of experience as a barrister in private practice and is also a Fellow of the RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce, an organisation for social progress) and a former BBC Regional Advisory Committee chair.

It is worth mentioning that the Office of the Complaints Commissioner of the Cayman Islands was established in July 2004 with a view to encourage government departments and agencies to better serve the public. This independent Office answers only to the Legislative Assembly as a whole through the Speaker. The Complaints Commissioner is an Ombudsman.

On November 19, 2010, the Cayman Islands Monetary Authority (CIMA) published a public notice to urge the public not to respond to e-mails that request personal bank information.

In the notice, the Authority reminded the public that, in accordance with best practices for banks licensed to operate in and from the Cayman Islands, banks do not request their customers’ personal details via e-mail.

So, any email that supposedly comes from your bank requesting to verify one’s personal or online banking details should be ignored. Also, it is recommended not to click any links included in such e-mail.

On November 15, Walkers, the leading international financial centre law firm, welcomed the confirmation of the final terms of the Alternative Investment Fund Managers Directive (AIFMD) and the removal of uncertainty for non-EU fund managers marketing non-EU funds in the EU as a positive development for the investment funds industry in the Cayman Islands, as well as in the BVI and Jersey.

On November 11, 2010, the final terms of the AIFMD were approved by the European Parliament.

Rod Palmer, partner and Global Head of Investment Funds with Walkers, said: “The confirmation that non-EU fund managers will be able to continue marketing Cayman Islands, BVI and Jersey funds to professional European investors is excellent news for the industry”.

Richard May, partner with Walkers based in the British Virgin Islands, said that the Cayman Islands, as well as the BVI and Jersey, are very highly rated by the FATF in respect to their anti-money laundering regimes. This means they will not have to make any changes in their funds’ operations to comply with the Directive.

According to Jennifer Thomson, partner with Walkers in the Cayman Islands, in recent discussions on the Directive, the Cayman Islands Monetary Authority (CIMA) confirmed their commitment to entering into co-operation agreements with EU regulators as a matter of priority. He said: “This follows Cayman’s long history of working with regulators worldwide and reflects Cayman’s own strong regulatory framework. We know Jersey and BVI regulators share this commitment as well.”

The Cayman Islands appears on the OECD’s “white list” of nations which have substantially implemented the internationally agreed standards on tax and information exchange. The jurisdiction continues to enter into new tax information exchange agreements (TIEAs) with EU member states.