With the ongoing debates in relation to offshore financial regulations, the positive contributions that offshore financial hubs make often gets lost. It is important to look at why offshore financial centres even exist in the first place before ridiculing them. Mr. Byles, the Director of the ‘Caledonian Global Financial Services’, recently released an article in relation to such questions.
Mr. Byles went on to say that, the only thing more prominent than the proliferation of global tax and regulatory initiatives is the question regarding the future sustainability of offshore financial services centres.
You can see the point he raises in his question, what is going to happen? No one knows, and after mounting pressure from the OECE (Organization for European Economic Co-operation) and other large regulator’s, there is no wonder that such financial centres are feeling the pressure.
Many offshore jurisdictions are constantly feeling the blows, and we are sure that they sometimes feel at breaking point due to the constant and disproportionately burdensome requirements needed simply to do business, or the jurisdictions will eventually find that the cost of supporting these new regulatory frameworks is just too high to remain globally competitive in the financial services arena.
However currently, it looks unlikely that the Cayman Islands are feeling such burdens, the Cayman Islands continue to demonstrate a very different stability compared to other offshore financial hubs, which gives the world confidence in the world of offshore financial services.
In many ways the Cayman Islands continue to lead the way, adding wealth management objectives of high-net-worth families and creating corporate efficiencies. Despite the millions spent on enhancing regulatory frameworks and accommodating the umpteenth international review of its legal and regulatory infrastructure, the Cayman Islands stand defiant.
However it is worth noting that, the Cayman Islands aren’t in this position due to stubbornness or persistence, quite the opposite, the success lies in the contribution the jurisdiction adds to the world economy and here is why;
The Cayman Islands is the leading place for healthcare captives, representing a massive 34% of all captives, and to-date approximately 90% of this is pointing towards the North American market. The Cayman Islands insurance market has been resilient in the challenging market that the rest of the world faces. In 2012 they received the highest number of captive licenses since the economic downturn in 2004. The Cayman’s captive section is still on the rise, with premiums at $11.83bn and total assets at $88bn, compared to $11.80bn and $69.2bn, a 27% increase from 2012.
This allows companies to afford hospital networks in the USA, Mr. Byles went on to say “One of the benefits of using the Cayman captive structure is that it offers flexibility to the client. This helps to address certain difficulties onshore clients may endure when attempting to secure insurance coverage via commercial insurance companies, or when they simply cannot access intended coverage in a cost effective manner.”
The Cayman Islands are one of the top 10 international financial centers in the world, and they have over 40 of the top 50 international banks holding licenses in the Cayman Islands. With over 80% of more than $1 trillian in deposits booked through the Cayman Islands, this represents inter-bank bookings between onshore banks and their Cayman Islands branches and subsidiaries.
The Cayman Islands are recognised for quality, their offshore banking services still continues to rise; it is also backed up with the strength of having no capital gains tax, no taxes on bank transfers and no exchange controls.
Private banking in the Cayman Islands is also recognised for its quality, with wealth managements handled by offshore experts, who help to improve succession planning, whilst preserving or maximizing capital for high-net-worth individuals. Although the issue of legitimate financial privacy is not at the forefront of the current debates, many stakeholders recognize that privacy has a key role to play.
All International markets know very well that the Cayman Islands has the global leading hedge funds in the world, but what many do not know, is how these hedge funds are used. The Cayman Islands funds actually add value within onshore economies. The Cayman Islands has facilitated hundreds of billions of dollars of investment into the OECD economies, like the USA, by using offshore hedge funds. The Cayman Islands funds provide a tax-neutral platform for international investors, which enables them to participate from some countries under a mutual investment purpose.
So, in many cases, the funds from the Cayman Islands invest in the projects based in these economies, like the USA, therefore it is ironic that the debate on the impact of offshore financial centers focuses on the issue of capital outflows, when in actuality, this capital, which often originates outside the US, ends up onshore benefiting the US and other OECD based economies via increased employment opportunities, resulting from those investments.
So, whichever way you look, the roll of the Cayman Islands banking, insurance, trusts and investment services, offers positive value to the global economy and it doesn’t look likely to slow down.
Clients can rest assured that the Cayman Islands look to remain a major player in the offshore financial service, because it continues to uphold a high caliber of international expertise, it is adding value in spite of regulatory developments.
Whilst no one can predict the future of the offshore Countries, it is fair to say the Cayman Islands have effectively demonstrated their staying power as one of the leading financial centers of the world. The Cayman Islands will continue to deliver great services to their clients and in the contact of the various global developments over the past 10 years or so, it is a remarkable success story.
To read the original article click here Why the Cayman Islands have staying power
(Source: Paul Byles, Director of the Caledonian Global Financial Services)