healthcare captives do not require high levels of capital. This in turn leads to more efficient use of that capital and a focus on adequacy of reserves. As a wise man I know likes to say, the two important sections of a captive’s balance sheet are cash/investments and loss reserves—maximise one, minimise the other, get it the right way around and you will have a successful captive. It is in this vein that captives benefit from the insight of our experienced insurance managers, who have worked with a variety of structures and programmes over the last 30 years. This insight can be invaluable to younger and new programmes.
Cayman’s hospital captives have on a whole been so successful
over the years that in this time of economic uncertainty, a number of them they have been easily able to offer further benefits to their corporate parent through dividends, grants or parental loans. Of course, approval of such must be granted by the regulators and consent is not granted lightly. But after almost 30 years of overseeing these captives, the regulators have well-developed processes for vetting such requests.
This brings me to another benefit of having a healthcare captive
domiciled in the Cayman Islands—personal interaction with the regulators. The Cayman Islands Monetary Authority believes that meetings with the captive owners, directors and consultants are an important oversight tool. The benefits flow both ways as the captives are able to directly communicate with their regulators and the regulators obtain a greater understanding of the captive’s structure, programme, and industry concerns and developments.
This was echoed by Dick Dixon, senior vice president, financial “Medical malpractice
captives and the risks they insure will probably jump over the next few years as fledgling healthcare
networks move to take advantage of new risk- sharing opportunities.”
Healthcare captives have also benefited their parent companies
in terms of claims control. We have often seen hospital captive boards go though the claims review process at board meetings and realise that the largest portion of claims are from a particular specialty or risk segment. This in turn leads to enhancement of the risk management programmes in that area, which in time will help to reduce indemnity costs. Over the years, we have found that having physicians on the board of directors or even just attending board meetings also assists in areas of risk control. Once these physicians see the effect of claims on the financial success of the captive, they will in turn press their physician colleagues with large claims to resolve any deficiencies in surgical processes, charting, adherence to policies and procedures, or even bedside manner. After all, cost savings realised by the reduction of claims can lead to increased funding being applied to patient care. This then benefits the physicians directly.
30 CAYMAN CAPTIVE
operations at Scott & White Healthcare (S&W), which has had a captive in the Cayman Islands since 1987. S&W is the largest multi- specialty practice in Texas and the sixth-largest group practice in the US. When asked why S&W decided to domicile in the Cayman Islands and why it remains here today, Dixon noted that initially it was attracted by the emphasis on healthcare and reasonable cost in comparison to elsewhere. It has reviewed this decision over the years as part of its corporate governance and still believes that the Cayman Islands is the domicile of choice for S&W. “The experience and quality of the service providers and regulators are unsurpassed in relation to healthcare captives. We value the periodic meetings with the regulators and find them to be very knowledgeable about our industry.”
The close relationship between our healthcare captives and their
insurance managers and other Cayman service providers can also been seen in their support of the Cayman Captive Forum (CCF) held in early December each year. Pertinent healthcare topics fill one of three tracks presented at the conference and will generally be presented by a number of major hospital systems willing to offer the benefit of their expertise. This year, the topics include healthcare reform, physicians’ roles in captive operations, turning around a financially challenged healthcare system, injury reduction programmes, and insuring more than medical malpractice through a captive. The support of the presenters and attendees has helped to develop the CCF into one of the premier conferences for the captive industry.
What does the future hold? Observers say that the number of
medical malpractice captives and the risks they insure will probably jump over the next few years as fledgling healthcare networks move to take advantage of new risk-sharing opportunities opening up as a result of national healthcare reform. Hospitals, physician groups, nursing homes and managed care organisations may for the first time choose to pool their numerous risk exposures in one medical malpractice captive. Some of these new captives will very likely decide to make the Cayman Islands their home. And we will certainly welcome them as the domicile of choice for the healthcare industry.
Monique Jackson is chairman of the Insurance Managers Association of Cayman. She can be contacted at:
mjackson@global.ky
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