The Cayman Islands’ position in the global reinsurance market could be “fundamentally” reshaped if it wins special status from United States regulators, according to international law firm Walkers.

The Caribbean financial services centre has been working to challenge Bermuda as an offshore reinsurance centre and it is pursuing Qualified Jurisdiction status under the US National Association of Insurance Commissioners framework.

Walkers said the Cayman’s pursuit of the designation represents “a significant step in the jurisdiction’s evolution as a reinsurance centre”.

Bermuda is joined by Japan, Switzerland, France, Germany, Ireland and Britain as the only countries that have met the NAIC's accreditation requirements and have been recognised for their regulatory frameworks since 2015.

The NAIC programme was designed to maintain standards for effective insurance company financial solvency regulation. It creates efficiencies for insurance regulators and companies, ensuring the re/insurers are not subject to financial examinations by multiple jurisdictions.

Cayman wants to join that list, a development Walkers said would carry “significant regulatory, reputational, and commercial implications for Cayman’s growing offshore reinsurance sector and its relationship with US insurance markets”.

An article on Walkers’ website and carried on the Mondaq Legal500 Intelligence site, prepared by partners in the firm’s Cayman office, Gary Harris and Juliana Tang, together with their colleague and senior counsel, Erin Diachkoff, concludes: “The pursuit of QJS signals the Cayman Islands’ maturation as a reinsurance jurisdiction and its commitment to meeting international regulatory standards, enhanced regulatory oversight and international co-operation.

“While the road ahead may take years rather than months, it is expected that obtaining QJS would open new opportunities for growth in the international reinsurance space.”

The QJS framework is designed to enable the needed cross-border jurisdiction while protecting US insurers and policyholders against the risks of reinsurer insolvency.

Reinsurers in the permitted jurisdictions are then allowed to seek certified reinsurer status with individual US state supervisors, and reduced collateral requirements when working with US ceding insurers.