Cayman takes lead on catastrophe bonds
(Royal Gazette): Recent figures published in Cayman have revealed that the islands is the leading offshore jurisdiction for listed catastrophe bonds, with a market almost seven times as big as Bermuda’s its nearest rival. There are 74 bonds listed on the Cayman Islands Stock Exchange with a value of over $7.7 billion. The first cat bond was listed in Cayman three years ago and Cayman Finance chair Anthony Travers says it has been a great success. "When you consider that the first cat bond was only listed in April 2007 it has been a great success story for Cayman and the Cayman Stock Exchange, particularly since Bermuda has in the past had the leading position in insurance related products."
Catastrophe bonds are used by re/insurers to give them extra capacity to cover catastrophic risks, such as earthquakes or hurricanes. They offer attractive rates of return to investors, with the risk being that investors can lose all of the principal if insured losses reach a predetermined level and the cat bond is triggered.
""These are fully regulated and transparent structures and, contrary to the misperceptions that still persist among a hard core of left leaning European bureaucrats, are quite typical of the well structured financial products that are attracted to an offshore financial centre like the Cayman Islands precisely because of the quality of its legal and regulatory regime," Travers added.
Category: Business
This is a good story and shows one aspect of the unsung areas of Cayman’s financial services strengths. The first cat bond issue was done in Cayman in the early 1990’s after Hurricane Andrew devastated Southern Florida. As a partner of Maples and Calder I had the honour and privilegeto advise on the transaction.
The captive insurance industry as a whole has been a key and growing part of our success since the late 1970’s . Although less flashy perhaps than the more recent structured finance and hedge fund businesses, it has proved far more stable and not only provides employment and career opportunities here but also brings many large groups to the Islands each year for their regular meetings.
What a relief to see so many positive messages coming out of Cayman in support of the financial services industry.
Thank you to Cayman Finance for continuing to fight the fight! The financial services industry is a vital part of our economy and if anyone does not believe this to be true, we only have to think of the detrimental effects to the economy that we have witnessed with 7500 less work permits here in the last 18 months.
Building this industry and welcoming the talent that accompanies it is the way forward for Cayman’s ongoing success and wealth for its citizens.