How did the captive concept originate?
1970’s
Back in the mid 1970’s, the professional liability markets were in a major crisis. The evolution of a sophisticated legal structure in the United States, and in particular developments in tort law, had let to an unexpected increase in liability claims. The hospital systems were particularly affected, and the health administrators were becoming increasingly disillusioned with the spiraling number of malpractice suits.
Out of this crisis, a prominent U.S. medical college developed the first Cayman Islands captive insurance company to provide coverage for their medical malpractice risks for their physicians. Given the success of this captive, other hospital systems soon jumped on the bandwagon and suddenly…Cayman had become the world’s domicile of choice for healthcare captives!
1980’s and 1990’s
Given the sudden development of this new area of business, it was immediately apparent that a Regulatory framework would need to be developed quickly and in 1980, the Insurance Law was introduced.
The Cayman Islands evolved into the second largest captive insurance domicile, and became known as the leading domicile for health care captives. 35% of all insurance companies were healthcare related, with healthcare no longer being restricted to just medical malpractice but encompassing a broad range of coverages including health, disability, managed care and long-term care.
Today
Business is now spread amongst a diversity of companies ranging from small private shareholders to large public corporations. Types of coverage vary from Workers’ Compensation and Product Liability to Life and Annuity Business.
The newest industry trend is the Segregated Portfolio Company, (“SPC”), known elsewhere as the Protected Cell Company. This concept has developed from the rent-a-captive legislation wherein there is no legal distinction between each member. The SPC provides a facility for the legal segregation of funds. Therefore its obvious use is in the Life and Annuity business where it provides added protection to individual portfolios.
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