Why Do Captives Remain So Popular In The Cayman Islands?

A captive insurance company is a wholly owned subsidiary insurer that provides risk mitigation services for its parent company or related entities. In its simplest form, the ‘captive’, wholly owned subsidiary is incorporated to insure against one or more risks to which its parent company is exposed. It is essentially a form of self-insurance, which is put in place within a group corporate structure for a number of reasons. Captives are usually established in the context of a company’s risk management strategy and are typically put in place because those risks that are looking to be insured by the captive are either non-insurable or priced too high in the current market.

The captive insurance industry in the Cayman Islands recorded 42 new international insurer licenses in 2025, which was the second year in a row at that number, according to fourth-quarter data released by the Cayman Islands Monetary Authority (CIMA).

The data released by CIMA showed that at the end of 2025, the jurisdiction reported 693 Class B licences, 16 Class C licences, and 11 Class D licences, with an aggregate total of 720 licensed insurance companies in operation. These entities collectively wrote $51.2 billion in premiums and held $176.2 billion in total assets. The data showed that the premium volume reflected a 24 per cent increase compared to 2024, while total assets rose by 15 per cent over the same period.

The 693 Class B licences (mostly captives) in 2025, represented an increase from 670 in 2024 and 658 in 2023. Accordingly, captives licensed in 2025 by CIMA accounted for 96.25 per cent of all international insurer licensees in the Cayman Islands.

The Cayman Islands has historically been a jurisdiction for captive insurance companies and is currently one of the leading captive hubs in the world, both in terms of number of companies and total assets under management. This is a result of Cayman’s world-wide reputation as a highly professional, yet business friendly and well-regulated environment, with a philosophy of imposing proportionate, risk-based regulations and rules backed by consistency of enforcement.

The growing popularity of the segregated portfolio (SPC) structure in the captive insurance industry is partly due to the fact that such structures allow insurers to add additional participants in a reinsurance programme without risk of cross liability. In fact, a distinctive feature of all SPCs is that the assets and liabilities of each segregated portfolio (also referred to as ‘cells’) are, as the name suggests, segregated from one another.  Each SPC cell, however, does not have legal personality. Ownership of the underlying assets in the cells is through classes or series of shares in the SPC which are designated to that particular cell.

The SPC structure is often seen in the context of the so-called ‘rent-a-captives’, whereby those wishing to reap the benefits of a captive insurance company (either for their own insurance or reinsurance) while minimising matters such as time, upfront costs, and maintenance, can simply become shareholders in an existing SPC and ‘rent’ a cell. The participants in a rent-a-captive structure pay premiums and service fees into the cell and in return they get access to the capital base they need to underwrite the risk, as well as an entitlement to any distributions made out of that cell. The SPC structure provides smaller businesses with a lower-cost entry point into the captive market, thanks to reduced premium thresholds and significantly lower formation costs.

There are also Portfolio Insurance Companies (PICs) which can be seen as a slight variation of the SPCs mentioned above. A PIC is similar to an SPC except that its cells have separate legal personality.

Other forms of captives include ‘Association Captives’, which are insurance companies owned by an association to meet the insurance needs of its members, and ‘Agency Captives’, which are insurance or reinsurance companies owned by one or more insurance agents, used to insure against the risks of those agents or any of their clients.

Cayman Islands domiciled captivesoperate primarily as Single Parent Captives (‘Pure Captives’), Group Captives, or Segregated Portfolio Companies (SPCs), allowing for bespoke insurance solutions. Businesses utilise them to manage complex risks, reduce reliance on commercial insurance, retain underwriting profits, lower insurance costs, enhance the ability to tailor coverage for hard to insure or emerging risks, enhance greater control over coverage and flexibility in managing risks, and increase the ability to allocate costs to different business units.

The continued growth of Single Parent Captives indicates that captives are increasingly being used by organisations to cover cyber risks that are difficult to place, expensive, or excluded in the traditional insurance market. By creating a wholly owned insurance entity, companies can customise policies to fit their specific risk profile, retain underwriting profits, and bridge gaps in standard cyber coverage. Group Captives act as a collaborative, accessible entry point for mid-market businesses seeking control over insurance costs and risk management, acting as an alternative to traditional insurance and costly single-parent captives. By pooling resources, members gain direct access to reinsurance markets, transparency in underwriting, and the ability to earn dividends on unused premium, particularly in casualty lines. Going forward, it is anticipated that economic uncertainty, rising premiums, and emerging risks, will drive more businesses to seek collaborative solutions that offer stability and cost efficiency.

A Class B(iii) Captive in the Cayman Islands is a specialised insurance company that writes 50 per cent or less of its net premiums from related business, requiring a minimum capital of US$200,000. These Captives are ideal for group risks, joint ventures, or scenarios with significant third-party business. They have the versatility of being suitable for complex risks that do not fit the 95 per cent single parent threshold of Class B(i) captives and can be structured as a standalone company or as an SPC.

This article was first posted in the IFC Review.

This publication is not intended to be a substitute for specific legal advice or a legal opinion. For specific legal advice on the subject matter of this Legal Insight, please contact: 

Partner: Gary Smith
E: gary.smith@loebsmith.com