Captives are flush with money, an industry veteran told the Bermuda Captive Conference.

Photo gallery

Kevin Yousif, president of Yousif Capital Management, said his sector of insurance was going through a golden time.

“We are out of the desert,” Mr Yousif said. “We have spent so many years living in a world of risk with no returns, and now we have a risk-free return. Finally, I look at one-year returns and the S&P is up double digits.”

He said YCM has about $14 billion in assets, and credited his firm’s portfolio success to its investments.

“When I look at the money market world, I see 4 per cent returns,” he said.

Hugh Barit, the chief executive of investment money management firm Performa, disagreed, saying the golden era was in the past. In fact, he thought it was a dangerous time.

“People are all over the map in terms of where they think things are going,” he said, adding that the only thing captives could really be certain about was uncertainty.

“With Trump in power, there is going to be volatility,” he said. “Is the market going to be up? Is it going to be down? Who knows?”

He thought it was a critical time to look internally, understand the business being underwritten, the firm’s risk tolerance and liquidity profile.

Jack Meskunas, executive director, investments, Oppenheimer, sided with Mr Yousif on the golden era question, but said that did not mean there was no volatility.

“There is actually a real rate of return on fixed income, which we have not seen in almost 30 years,” he said. “That means a rate of return over and above the rate of inflation. Inflation is about 2.5 per cent. If you have the ten-year treasury yielding 200 to 225 basis points more than that, that means you are actually beating inflation.”

He said for the first time in 25 years, bonds are attractive.

“You can actually make money in bonds,” Mr Meskunas said. “In fact, there is a potential to make double-digit rates of return as interest rates are predicted to go down over the next two years.”

Panellists were asked about their favourite jurisdictions to do business.

Mr Barit has done business in both Cayman and Bermuda.

“From an asset allocation standpoint, it is easier to add more equities to an equity portfolio in Bermuda with the Bermuda Monetary Authority than it is with the Cayman Island Monetary Authority,” he said.

Mr Barit added that at one time, the Cayman Islands authority would not allow more than 20 per cent allocation to equities in a captive portfolio.

That has increased somewhat, but Mr Barit said you still need to get specific exceptions from the authority, whereas in Bermuda you do not.

“Bermuda is a little more flexible on this point,” he said.