Cayman Islands: Building On Innovation And Sustained Growth

The strong, sustained growth is spurring further innovation. In 2025, the Cayman Islands will continue to enhance efficiencies as a jurisdiction, ensuring that services are easier and faster to use, and responding to client demand for new asset classes, thematic funds, or innovative investment structures.

As new asset classes emerge and client expectations grow more complex, the jurisdiction’s ability to adapt and modernise is sparking a new wave of growth across multiple sectors, and the islands are already seeing increasing allocations to digital assets, a crossover between insurance and funds, and interest in tokenised funds.

Cayman’s tax neutral position will continue to be the basis for new innovative solutions to facilitate cross-border trade, commerce and investment flows in a world that is growing more fragmented amid trade and tax disputes.

Funds Industry Reaches New Milestone

Last year, the Cayman Islands fund industry achieved a new milestone, with more than 30,000 alternative investment funds now registered with the Cayman Islands Monetary Authority (CIMA).

The total number of funds increased by 2.7 per cent in 2024 to reach 30,150, collectively managing more than $8.2 trillion in net assets. The rise was driven primarily by private funds, which grew by 4.8 per cent, while the number of mutual funds, which are mostly hedge funds, was up 0.4 per cent.

The United States is Cayman’s most important source market in the funds space. US Securities and Exchange Commission (SEC) data for the first quarter of 2024 shows that nearly a third (31.6 per cent) of the net assets of all SEC-registered private funds are managed by Cayman-domiciled entities – far outpacing trailing domiciles like Luxembourg (5 per cent) and Ireland (3.2 per cent).

When it comes to hedge funds, the jurisdiction has an even greater share: more than half (53.6 per cent) of the net assets of SEC-registered hedge funds are Cayman-based.

In addition, the islands remain a popular hub for investments into and from Asia, including in key markets like Japan, China, Hong Kong, Singapore, and Korea. Fund managers use a range of fund structures, where Cayman Islands vehicles are used either as main funds, feeder funds that invest in onshore funds such as Singapore variable capital companies or Australian unit trusts, parallel funds alongside onshore vehicles, and pure Cayman Islands master-feeder structures.

Entity Registrations Reflect Broader Growth

The growth in the funds sector is mirrored by the registration of legal entities. Partnerships, often used as investment vehicles, increased by 3.9 per cent to reach 40,763 active partnerships in 2024, with 3,960 new registrations during the year.

Company registrations also jumped, with the total number increasing from 118,443 in 2023 to 122,449 in 2024 – a 3.4 per cent growth. The jurisdiction saw 11,819 newly registered companies in 2024.

While exempt companies remain the most popular structure, there has been notable growth in segregated portfolio companies, used, for example, in insurance and investments; foundation companies, popular among De-Fi and Web3 projects; and limited liability companies, which are a hybrid combining characteristics of an exempted company with those of an exempted limited partnership.

Insurance And Reinsurance Sector Expansion

Another key pillar of the Cayman financial services industry, the insurance and reinsurance sector, also grew significantly in 2024, with CIMA issuing 40 new insurance licences – the highest number in a decade, which included one Class D open market reinsurer. In addition, Cayman welcomed three new insurance managers.

By the end of 2024, Cayman was home to 697 international insurance companies, writing $41 billion in premiums and holding $153 billion in total assets.

New business was split between traditional single-parent captives with 13 new licences issued and 24 newly licensed third-party reinsurers. The Insurance Managers Association of Cayman (IMAC) has noted that this growth trajectory is expected to continue well into 2025.

The reinsurance sector now encompasses 100 licensed companies contributing more than $25 billion in premiums and $93 billion in assets, according to CIMA statistics.

Cayman’s appeal as a captive insurance and reinsurance centre lies in its regulatory framework; collaboration between government, regulators and service providers; depth of expertise; and the ability to meet global standards without stifling innovation.

This environment supports growth, not just in terms of company registrations, but also in local economic impact. A recent study pegged the insurance sector’s contribution to the local economy at CI$233 million annually, highlighting its value through employment, service demand, government fees, and even tourism by generating business travel.

Trusts And Private Wealth Management Flexibility

The Cayman Islands enacted a significant trust law reform last year, abolishing the rule against perpetuities for ordinary trusts through the Perpetuities (Amendment) Act. This change allows most new trusts to last indefinitely, enhancing long-term planning flexibility.

The development enables existing trusts to be extended and invites new international trusts to elect Cayman law as their governing framework. Combined with the jurisdiction’s discretionary, reserved powers and purpose trust options, Cayman is well-positioned to serve the evolving needs of high-net-worth individuals and families worldwide.

In 2025, many trusts will be reviewed and updated to take account of the new legislation for long-term family wealth and succession planning. The new regime will, for example, allow dynastic trusts outside of STAR trusts (Special Trusts – Alternative Regime), which were already exempt from perpetuity limits.

STAR Trusts continue to be popular as they offer distinct advantages. They can be established for the benefit of persons, purposes or both, and only an appointed enforcer has the legal right to enforce the trust.

STAR Trusts are often used as dynastic family trusts, as ownership vehicles for private trust companies, business continuity frameworks, structured finance vehicles, and philanthropic instruments that may fall outside standard legal definitions of charity.

The Cayman Islands General Registry reported 2,447 active trusts at the end of 2024, with 88 new trusts registered and only 33 dissolved – the lowest number of terminated trusts in a decade. However, it should be noted that because there is no requirement to register Cayman trusts, the actual number of trusts governed by Cayman Islands law is far greater. 

Once viewed primarily as a jurisdiction for structuring, Cayman is now increasingly a place where families choose to live, invest and operate family offices permanently.

Robust and streamlined residency-by-investment programmes have allowed more families to establish roots. With a strong legal foundation, proximity to key markets, and a sophisticated professional service provider network, Cayman supports family offices across asset management, governance, and succession planning.

Virtual Assets And Decentralised Finance Solutions

About two-thirds of the world's offshore investment funds are domiciled in Cayman, making it a natural destination for digital asset investment vehicles. As hedge funds increase their exposure to digital assets, Cayman’s share of this market continues to grow.

According to the Global Crypto Hedge Fund Report by the Alternative Investment Management Association (AIMA) and PwC, 63 per cent of surveyed crypto hedge funds are domiciled in Cayman, with nearly half of all traditional hedge funds now investing in the space.

With more than 200 dedicated crypto funds and a rising number of tokenised fund structures, Cayman has firmly established itself as the world’s top domicile for digital asset funds. From tokenised treasuries to DeFi and stablecoin investments, the jurisdiction’s financial services ecosystem supports the full spectrum of digital strategies.

Tokenisation – the conversion of traditional fund units into blockchain-based tokens – is seeing greater interest due to its potential for liquidity and broader investor access. Subscriptions and redemptions in digital assets are allowed and governed by robust anti-money laundering and customer due diligence requirements, aligned with Financial Action Task Force (FATF) standards.

Legislative updates, such as the Virtual Asset (Service Providers) (Amendment) Bill of 2024, demonstrate Cayman’s adherence to international standards, regulatory clarity, and innovation.

The first phase of the Virtual Asset Service Providers (VASP) regime introduced a registration requirement which focused on anti-money laundering and countering the financing of terrorism measures.

Phase two, which took effect in April 2025, introduced a licensing regime for trading platform operators and virtual asset custodians, as well as prudential measures for the provision of those services.

A third phase is envisioned to address the remaining elements of the regulatory framework, such as a regulatory sandbox, initial coin offerings, and tokenised funds.  

Meanwhile, Cayman Islands foundation companies have emerged as the preferred legal structure for decentralised autonomous organisations (DAOs). Introduced under the Foundation Companies Act 2017, these entities combine elements of corporations and trusts, offering legal personality, limited liability, and purpose-driven governance without requiring shareholders.

The concept of ‘wrapping’ a DAO with a legal entity like a foundation company provides protection from personal liability for DAO participants while allowing the organisation to engage in contracts, own assets, and operate with greater regulatory certainty. This approach has gained importance following legal cases, where unwrapped DAOs were treated as general partnerships, exposing participants to personal liability.

Looking Ahead

A key reason for the success of the Cayman Islands has been the ability to adapt quickly to international developments and provide solutions that facilitate cross-border trade, financing and investment allocations.

In an environment of escalating tariffs, trade disagreements and tax disputes, a transparent, tax-neutral platform, which eliminates double taxation and other barriers, will become even more important, together with Cayman’s focus on further improving the ease of doing business and innovation.