One year on from its redomestication to the Cayman Islands, Gerardo García, Chairman and CEO of Barents Re, assesses the overall impact of the move.
Last year, we took the opportunity to redomicile Barents Re to a jurisdiction which offers a strong legislative framework, a positive long-term credit outlook and political stability: the Cayman Islands. Given that one of the key reasons we chose the territory was that it was already home to over 700 companies in the insurance sector, I would not describe the move as radically pioneering. The Cayman Islands has established itself as a major financial centre, with good communications and general infrastructure that has helped the country become the world’s fifth largest banking centre and largest hedge and investment fund domicile, with over 9,000 funds registered. But I certainly would describe the move as an overwhelming success for ourselves, our clients and all our business partners.
Benefits to clients and business partners
It was just under two years ago that we started considering our options for a new home for the company. We employed a whole host of financial and regulatory criteria that proved invaluable in our benchmarking of the wide and varied range of possible jurisdictions. While processing the sheer quantity of technical data was an achievement in itself, we always maintained our focus on our core aim: our choice of new jurisdiction must have a positive reputation and credibility with our clients, business partners, regulators and rating agencies. The Cayman Islands ticked all the boxes.
Barents Re has established itself as a niche reinsurer focused on successfully managing severity and the bottom line. We use retro capacity to great effect which positively impacts our capital position, arguably the most important variable for any re/insurance company. With nearly $500m of capital and a reputation for underwriting expertise and discipline, clients and business partners trust Barents Re for their reinsurance needs.
Clients and business partners have, of course, continued to receive these same high levels of expertise and have been unanimous in giving a very favourable reception to the redomestication. They believe that our move to the Cayman Islands, with its positive reputation as a financial services jurisdiction, will provide even greater reassurance for their own stakeholders.
The formal description of the move was ‘redomestication by way of continuation’ (i.e. the company itself did not change but simply redomiciled to a new jurisdiction). One of the factors we took into consideration in our decision making was the ease of moving from one jurisdiction to another from the perspective of brokers, insurance companies and other bodies with whom we do business. The Cayman Islands proved to be an excellent choice in this regard as the transition was very smooth indeed.
As I write, the uncertainty surrounding Brexit continues with no immediate resolution in sight. By the time you read this, an agreement may have been reached and we may have greater clarity on the future of the UK’s economic and trading relationships with the EU and the wider world. I believe that Brexit presents businesses with both challenges and opportunities. But the uncertainty surrounding its outcome is a destabilising factor in companies’ long-term planning.
A distinct advantage of the Cayman Islands is that it is an autonomous British overseas territory which may prove to be very beneficial as part of our Brexit planning. The Cayman Islands operates a similar legal and financial framework to the UK, and indeed Europe, a region that continues to form an important part of our growth strategy.
Since we began operations in 1996, we have always been committed to the highest standards of regulatory compliance and corporate governance. All our staff recognise the importance of adhering to all applicable laws and regulations in the territories in which we conduct business around the world. The move to Cayman Islands provided the catalyst for further corporate governance improvements by the creation of five new committees in late 2018. Reporting to our Board of Directors, we now have committees for Audit, Compensation, Investments, Reinsurance, and Risk & Compliance, all of which are staffed by expert and seasoned professionals, including members of the Board of Directors.
A (Excellent) rating
Just six months after we completed the move, we were delighted to receive affirmation in December 2018 from A.M. Best of our A (Excellent) Stable Outlook financial ratings for Barents Re Reinsurance Company, Inc. and Barents Reinsurance S.A. Looking ahead, the Cayman Islands’ long-term outlook is seen as a positive benefit in favour of the A.M. Best ratings because the rating of a company is influenced by the jurisdiction where the company is established.
In March this year, I had the great pleasure of hosting our cocktail party to celebrate the official opening of our Cayman Islands office. Notwithstanding the fact that we had already been operational in Cayman Islands for several months beforehand, it was great to welcome so many guests from the local business community along with business partners internationally to a wonderful event. It was a fitting reminder that this move has represented an important and positive step in the development of Barents Re. We can look forward to the future with great confidence.