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Captive-Insurance.Net - Your Essential Captive Insurance Online Resource |
US Money Woes To Hit Cayman
The fallout in the US financial markets as well as the recently approved and possibly unwise bailout plan will not only impact US markets and other onshore economies, it has serious potential ramifications for offshore as well, and certainly in the Cayman Islands.
As wealthy and ordinary American citizens experience serious erosion in their wealth, the Cayman Islands should expect to see a reduction in US–based travel to, and spending and investment.
As far the financial services sector is concerned, the major impact will therefore depend on whether the various entities are reduced significantly as a result of the crisis. In the case of entities which generate fees on the basis of market values, such as in the case of fund or trust administration, whether there is serious erosion in value of assets under administration. Chargeable fees will come down as money is withdrawn. It is also partially due to their decision to hold cash as a safety net against negative market movements in their current investments, thereby creating a vicious downward cycle on the financial markets. Cash as an asset is retaining its value whilst stock isn’t.
In the case of the funds sector, anecdotal evidence indicates that the Cayman Islands are already losing some funds as a result of the crisis. Most experts believe that the insurance markets in the US will see hardened market and pricing as a result of the crisis and following the US government takeover of its largest national insurer AIG. The outlook for the Caymans is far from bright, however on a positive note other offshore jurisdictions all around the world are in the same situation. It may be a case that only the strongest survive.
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