As we near the end of the financial year, it’s a good time to look ahead to 2025 and factors that could impact the global insurance market. Should you be making a change to your insurance? Perhaps!
Premium Rate Predictions
Following the recent and long-awaited cuts to the Federal Fund rates in September and November 2024, and with further cuts anticipated during 2025, the 3/2024 World Insurance Sigma from Swiss Re predicts that general inflation rates will soften leading to a reduction in premium rates. In contrast, lower interest rates often lead to a reduction in investment income for insurers who in turn may look to raise premiums to offset the decline in returns while investment portfolios are rebalanced.
Natural Catastrophe Challenges
The impact of two major hurricanes hitting Florida in the latter half of 2024 will most likely limit any potential rate declines in property catastrophe business, and the property market could see a hardening of premium rates. Losses from Hurricane Milton are expected to push global industry losses over $100 billion for the fifth consecutive year. The growth in global insured losses is in part driven by an increase in the frequency and severity of natural catastrophes. Insurers now face challenges from increased losses and potentially larger protection gaps as more regions of the world fall into high-risk zones.
The Benefits of a Cayman Captive Management Insurance Company
So, taking into consideration all that I’ve outlined above, what can (or should) you do? Consider using a Cayman captive insurance company to manage your own insurance risk! Here are just four reasons why.
1. Flexibility in Insurance Coverage
Companies who self-insure have greater flexibility to tailor their insurance coverage to fit their specific requirements or to eliminate coverage gaps found in the commercial market. For companies with favorable loss history, retaining a portion of its own risk within a captive insurance vehicle can help to achieve lower premium levels while also providing access to the reinsurance market.
2. Tax Minimization or Deferral
Entities not electing to pay tax within the U.S. can benefit from minimized or deferred tax payments through properly structured and adequately capitalized captive insurance arrangements.
3. Professional, Sound Regulatory Environment
Insurance companies in the Cayman Islands are regulated by the Cayman Islands Monetary Authority (CIMA) under the Insurance Act. CIMA is an established regulator in the international market with a reputation for being open and engaged with overseas regulators in the international market. The modern company and captive insurance legislation provides for a straightforward approach to licensing with appropriate capital requirements for license holders.
During the first three quarters of 2024, CIMA issued 29 new insurance licenses, demonstrating that the Cayman Islands continues to be a premier jurisdiction of choice for companies looking for an alternative risk strategy solution to the traditional market.
4. Financial Services and Professional Services
The captive insurance sector is long-established and highly developed, making it well placed to support a variety of risk program structures. In fact, GCM has over 40 years’ experience in the Cayman Islands providing captive insurance management services to our clients. Aside from access to insurance managers, most of the world’s top professional law and audit firms have offices in the Cayman Islands assisting with a well-structured and planned offshore risk management program.
Reach Out and Let’s Talk
So, what do you think? I’d love to chat with you further about the four items above and how GCM can help you. All you have to do is reach out!