Synergies for Canadian and Cayman captive insurance markets

Synergies for Canadian and Cayman captive insurance markets

Synergies for Canadian and Cayman captive insurance markets More and more Canadian companies are moving to establish captive insurance arms in the Cayman Islands, according to the organization focused on tracking those developments.

“As the traditional insurance market in Canada has not been as volatile as the U.S. in recent times, the opportunities for using captives are not as common,” said Paul Arbo, partner with the firm BDO in the Cayman Islands.

Nonetheless, companies are frequently turning to captive insurance for innovative purposes such as terrorism threats, environmental pollution, warranty risk and premium or secondary healthcare coverage, according to The Insurance Managers Association of Cayman (IMAC).

Through frequent meetings in Canada, the organization has laid out the advantages of capital structures in general, as well as the benefits of Cayman as a domicile with business owners and executives there.

Captives are increasingly viewed as useful structures for diversifying a company’s business operation and income stream and keeping those revenues in house, rather than paying them out to the commercial underwriter.

When determining if it makes sense for a business to think about a captive, Arbo stated, “My general rule is that if your annual insurance spend is over $500,000, your loss history is consistently good, and if you are underwhelmed by the insurance coverages you currently have in place, then you may be a good candidate to consider a captive.”

“In addition to the tax information exchange agreement that Cayman has with Canada, which helps Canadian companies take advantage of the same cost-effective tax strategies as would be applicable for companies domiciled in Barbados under that double tax treaty, Cayman also offers the effective use of segregated portfolio companies and the newly launched portfolio insurance companies. We are excited to be working with Canadian captives as they tend to really think outside of the box when considering business to put in the captive and it is this kind of innovation that we, as a domicile, thrive on," explained Rob Leadbetter, IMAC Chairperson.