Bermuda London Presentation Focuses On New Financial Instruments

Jason Gorringe, Tax-News.com, London

23 January 2001

Bermuda's government turned out in force at a business presentation held in London yesterday under the slogan 'Bermuda Means Business'. 130 delegates heard Prime Minister Jennifer M Smith, Finance Minister C Eugene Cox and Telecommunications and E-Commerce Minister Renee Webb expounding Bermuda's varied attractions for business.

One of the day's main themes was the so-called Convergence Initiative, under which Bermuda means to encourage use of the island for development of novel financial products combining elements of insurance, e-commerce and conventional capital markets instruments. Bermuda-based HedgeWorld Ltd (which offers crossing of hedge fund investments in association with the Bermuda Stock Exchange) plans to launch www.bermudaconvergence.com as an information resource on the new products.

In plainer English what this boils down to is the securitisation of risk, as for instance in Special Purpose Vehicles (SPVs) and Bermuda is not the only offshore jurisdiction to be experimenting with them. Guernsey, another low-tax jurisdiction with a stock exchange and an insurance sector, has a number of listed SPVs. Bermuda's edge may come from its advanced position in e-commerce, and its linked emergence as a base for hedge fund trading. What is important for successful SPVs, as for any other securitised capital markets instrument, is distribution, or to give it another name, liquidity. It's much too soon to say that Bermuda, or any other jurisdiction, is a market leader in respect of distribution. The absence of tax in Bermuda is a key aspect of its suitability as a base for launching new types of capital market instrument, but what will determine the eventual shape of such a market is the behaviour of the bulge-bracket banks, which completely dominate capital markets distribution.

In the corridors of the London meeting the buzz was about Bermuda's situation vis-a-vis the OECD. Although the island is quietly satisfied about its success so far in staying out of trouble, it runs a risk of becoming isolated from the growing offshore resistance movement that took clearer shape at the Barbados meeting two weeks ago. Bermuda doesn't plan to attend the follow-up OECD multilateral talks in London at the end of this week. Last night's after-dinner speaker, Marcus Killick, who was Engagement Director for the just-completed KPMG Review of Caribbean Territories and Bermuda, warned that the story of 'offshore v. the OECD' was very far from over. But he let slip his own affiliation when he told a joke against the OECD which is rather too rude to repeat here.

Recommended