Despite the softening of the global insurance market, the Cayman Islands captive sector reported continuing growth, particularly among those looking for cover in the troubled medical malpractice line.
At the end of September 2007, there were 49 new captives licensed in the 2006-2007 fiscal year, for a total of 756 active captives in the Cayman Islands. Annual premium written was in excess of $7.4 billion, while reported assets were more than $32 billion, according to Ted Bravakis, director of public relations, Portfolio of Finance & Economics, for the Cayman Islands government.
He noted that among the 756 captives, there were 122 segregated portfolio companies, with 484 segregated portfolios operating within them.
"This clearly demonstrates Cayman's strength and credibility in the global marketplace," Mr. Bravakis said.
He also observed that hundreds of health care providers use Cayman captives to manage or reduce their cost of risk, balancing rising premiums against retained insurable risk exposures.
"The historical growth trend in Cayman captives and the characteristics of the current medical malpractice crisis suggest that more health care providers will weigh the benefits of captive insurance in their risk management plans," he said.
The trend in Cayman captives tracks consistently with three medical malpractice crises occurring in the 1970s and 1980s being repeated now in the 2000s, he noted:
o In the late 1960s and early 1970s, medical malpractice premiums lagged behind claim costs. In the mid-70s, insurers responded by implementing substantial rate increases to cover the cost of claims.
o In the 1980s, premium rates again lagged behind loss costs. Once again, insurers responded by raising premium rates. Many insurers decided to pull out of the medical malpractice insurance market because medical malpractice was deemed unprofitable. Out of necessity, many health care providers formed captives to help in managing their medical malpractice risk exposures, Mr. Bravakis said.
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