CONTRIBUTOR FEATURE – IMAC
Kevin Poole, general manager of IMAC, analyses why there has been a spike in interest in specific and specialised forms of captives.
Cayman Islands has experienced a marked increase in the use of segregated portfolio companies (SPCs), portfolio insurance companies (PICs) and group captives in recent years, driven by the growing interest of middle-market and small and mid-size enterprise (SME) clients exploring captive insurance solutions.
These flexible and efficient structures offer tailored insurance strategies, allowing businesses to assume more control over risk and cost.
Segregated portfolio companies (SPCs)
Cayman was one of the pioneers for SPC structures, and in 1998 became one of the first jurisdictions to legislate formal asset and liability segregation within a single corporate entity. The SPC framework was introduced via amendments to the Companies Law (now the Companies Act), primarily to serve the needs of the captive insurance and investment fund industries with a keen interest in:
The Cayman SPC model remains a compelling choice for sponsors seeking to offer turnkey insurance solutions to third parties, while ring-fencing risk. It enables the insulation of liabilities within individual portfolios, ensuring that the underperformance of one programme does not affect the broader company.
Since its introduction in 1998, the SPC legal framework has matured through regulatory guidance and evolving case law. A pivotal Cayman Grand Court ruling in the 2020s reaffirmed the legal separation of segregated portfolios, significantly strengthening the SPC structure’s credibility and reinforcing its global appeal.
Cayman’s regulatory approach for SPCs:
In the Cayman Islands, SPCs are commonly licensed as Class B (re)insurers, though they may also be licensed as Class C if all portfolios (cells) are fully collateralised.
The licence subclass – B(i), B(ii), or B(iii) – is determined by the amount of third-party or unrelated risk underwritten and the ownership structure. For example:
SPCs may also operate as composite insurers writing both general and long-term business, in which case the minimum capital requirement (MCR) and prescribed capital requirement (PCR) of both licence classes apply.
While each segregated portfolio within an SPC is not a separate legal entity, its assets and liabilities are statutorily ring-fenced under the Companies Act. New cells can be added with approval from the Cayman Islands Monetary Authority (CIMA) following the submission of a business plan detailing the proposed participant, programme structure, and a three-year pro-forma projection. Though the Companies Act requires that each SPC be solvent, CIMA typically requires adequate capitalisation aligned with the risk profile of the business written.
Owners may use either participation agreements or shareholder agreements for each SP. CIMA accepts both formats, and the choice depends on the SPC owner’s preferences and specific business needs. For solvency assessments, CIMA evaluates the SPC as a whole, aggregating all cell results to determine overall compliance with capital requirements.
Portfolio insurance companies (PICs)
Introduced in 2015, PICs was an innovative step in Cayman’s insurance regulatory framework. Created within an SPC, a PIC is an independently incorporated insurance company affiliated with a single portfolio. Unlike traditional cells, PICs are legal entities with their own board of directors, licensing and regulatory oversight.
CIMA, in collaboration with industry stakeholders, developed the PIC regime in response to growing demand from insurance managers and international sponsors. Many clients sought greater control, formal governance rights and a clearer legal structure particularly for fronting arrangements, reinsurance, and recognition in other jurisdictions – beyond what the traditional SPC model could offer.
PICs combine the cost-efficiency and flexibility of SPs with the structural integrity of standalone captives, making them well suited for:
Some key regulatory highlights that are useful to know:
Cayman’s regulatory approach for PICs
A PIC is a separately incorporated insurer formed by an SPC and linked to a specific segregated portfolio. While the licensing process is similar to that of an individual SP, each PIC must be independently registered with CIMA under the Insurance Act (typically in line with Class B insurer regulations) and operate separately from the SPC’s overarching licence.
As standalone legal entities, PICs are required to have their own board of directors and governance policies, both of which must be reviewed and approved by CIMA during the registration process.
Group captives
One of the fastest-growing segments of the Cayman Islands’ captive insurance market. These structures allow multiple unrelated companies, often within the same industry or facing similar risk exposures, to pool resources and share costs to own and operate a captive insurance company jointly.
Cayman is an especially attractive domicile for group captives due to its deep regulatory expertise and long-standing experience with these types of entities. Many Cayman-based group captives operate through a fronted programme, in which a licensed insurer issues policies to members and reinsures the risk back to the group captive.
This approach allows each member’s exposure to be segmented into frequency and severity layers, commonly referred to as the “A fund/B fund” model. Under this structure, a member’s maximum premium in any given year is typically calculated as 2x the A fund plus the B fund. These contributions are actuarially determined based on each member’s individual risk profile, which is particularly appealing to members who believe their risk is better than the industry average.
Group captives also offer members the opportunity to earn dividends for each underwriting year, depending on both group-wide performance and individual member results.
For many mid-market businesses who might find the cost of establishing a standalone captive prohibitive, group captives offer a cost-effective, risk-sensitive alternative. This structure also promotes strong risk management and loss control practices, often leading to improved outcomes and healthy competition among members.
Historically, group captives in Cayman have been concentrated in industries such as trucking, manufacturing and construction, often covering workers’ compensation, general liability and auto liability. However, recent years have seen growing interest from specialised sectors, including green energy providers and last-mile delivery services. Coverage offerings have also expanded to include medical stop loss (MSL) programmes, allowing members to participate in more than one group captive or allow members to purchase umbrella coverage for enhanced protection.
Cayman’s regulatory approach for group captives
Most group captives in the Cayman Islands are licensed as Class B(i) insurers, even though they may include multiple member companies. This is a result of the Insurance Act defining “related business” to include entities “related through common ownership or a common risk management plan”. Since group captives operate under a unified risk management framework, the business written is considered related, thereby qualifying for a Class B(i) licence.
Typically, each member appoints a director to the board, and as such, each director must receive regulatory approval from CIMA. Once ownership is diluted below the 10% threshold, adding new members becomes less administratively burdensome.
Licensing statistics
As of Q2 2025, the Cayman Islands was home to 139 SPCs, collectively writing $4.6 billion in premium and holding $17.6 billion in assets. A recent Q2 analysis confirmed the existence of 595 SPs.
Also at the end of Q2 2025, there were 135 group captives accounting for $5 billion in premium and $14 billion in total assets.
In the case of PICs, growth has been significant, with a substantial increase from just 19 PICs in Q4 2018, to 63 by Q2 2025. This increase reflects growing market confidence in the PIC structure, which provides a fully incorporated alternative to traditional unincorporated cells. PICs offer sponsors enhanced governance control and the ability to appoint their own directors, making them an increasingly attractive option.
Drivers of growth in SPC and PIC structures
Regulatory Innovation: Cayman’s forward-looking approach, including enhancements to SPC legislation and the introduction of PICs, continues to foster industry confidence through regulatory responsiveness and structural flexibility.
Economic Efficiency: SPCs offer a cost-effective, ring-fenced platform ideal for rent-a-captive models, appealing to companies seeking scalable solutions without the need to establish standalone captives.
Sector-Specific Demand: Industries such as healthcare writing professional liability risks and MGU/MGA’s wishing to share in clients risks increasingly gravitate toward SPCs for their ability to isolate risk and customise insurance programmes, a model well supported by Cayman’s regulatory framework.
Favourable Market Conditions: Ongoing growth in premiums and assets across the captive sector reflects strong demand for bespoke risk transfer solutions, especially within SPC structures.
Group captive expansion
The expansion of group captives is largely driven by continued hardening in commercial insurance markets, particularly in sectors such as trucking. As traditional insurers raise premiums, restrict underwriting, and reduce capacity, many mid-sized businesses are turning to group captives as a practical and cost-effective alternative.
Increased awareness and understanding of the captive model are also contributing to demand, with more mid-market companies now proactively seeking captive options through their brokers.
In summary
The Cayman Islands remains at the forefront of the captive insurance industry, driven by regulatory innovation, responsive oversight and adaptable structures such as segregated portfolio companies (SPCs), portfolio insurance companies (PICs), and group captives. These flexible solutions offer organisations, particularly in the middle market, sophisticated and effective tools to manage risk, reduce costs and gain greater control of their insurance programmes.
As global demand for resilient and tailored risk financing continues to grow, Cayman’s robust captive framework is well positioned to deliver.
Kevin Poole is general manager of the Insurance Managers Association of Cayman. He can be contacted at: [email protected]