Thursday, September 14, 2006

NEW YORK, USA (Reuters): Cayman Islands legislators plan to bolster the territory's insurance laws, a spokesman said last week, with an eye to growing a commercial reinsurance market.

The Caribbean tax haven's interest has been spurred by the success of Bermuda's reinsurance market, now capitalized with in excess of $100 billion.

The U.K. territory is already the biggest hedge fund domicile and the third-largest captive insurance market, after Bermuda and the United States.

Captive companies are set up by corporations to provide what is effectively self- insurance.

Legislators are in the "early stages" of considering recommendations compiled by a special working group, said the Cayman spokesman.

Legislators were given 23 recommended changes compiled by a working group appointed by the Cayman Islands Monetary Authority.

Cayman's review of its insurance laws, its first comprehensive one in almost three decades, has to be signed by legislators to take effect, the spokesman said.

Among the changes being considered are separate laws for commercial reinsurers. Reinsurers offer protection to other insurers to spread the risks in policies sold to corporations and individuals.

Cayman's laws don't currently make a distinction between insurers and reinsurers.

Cayman attracted one commercial reinsurer in 2004. Greenlight Reinsurance Ltd., a privately held $250 million reinsurer, was founded by New York-based hedge fund Greenlight Capital in 2004.

Mary Lou Gallegos, Cayman Islands Monetary Authority insurance supervisor, told Reuters in an e-mail she is counting on Cayman's insurance law amendments to pave the way for other reinsurers to join Greenlight.

Ms. Gallegos said she was "looking at any changes that may be necessary to the existing legislation to accommodate this market."

Several changes designed to bring Cayman insurance laws in line with international standards are also being considered, according to comments in the working paper, available on the Monetary Authority's Web site.

"There is an opportunity for Cayman to firmly establish itself as a domicile that can house the non-captive reinsurance market, which has traditionally gravitated towards Bermuda," said the working group, in its paper.

Bermuda, a mid-Atlantic British territory, has become an established market for commercial reinsurers and captive insurers over the last five decades.

Bermuda's reinsurers provide 40% of U.S. property-catastrophe reinsurance capacity, according to data from the Assn. of Bermuda Insurers and Reinsurers.

Cayman said commercial reinsurers and insurers joining its developing market would be charged around $55,000 for annual license fees, on par with what is charged in Bermuda.

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