Bermuda To Withstand Competition

by Amanda Banks, Tax-News.com, London

17 January 2012

In a spirited address to Bermuda's House of Assembly, Bermuda's Premier and Minister of Finance Paula Cox sought to allay fears that the Cayman Islands, in its proposals to diversify its economy to attract insurance companies, could present a challenge to Bermuda's position as the world-leading domicile for (re)insurance entities.

Cox reiterated that the provision of a number of concessions, such as work permit exemptions, will not dethrone Bermuda as the (re)insurance domicile of choice. She said: “Provided that [Bermuda] remains focused on its strategies of collaboration with its business partners to enhance its enviable reputation by strengthening the territory's relationships with the European Union, UK and US jurisdictions, strengthening Bermuda's regulations to satisfy the global regulatory agencies, and enacting business-friendly legislation, it is unlikely that this initiative will represent a serious threat to Bermuda’s existing reinsurance market in the short term.”

“[The] Bermuda marketplace is known globally as a centre of excellence in the area of reinsurance underwriting," Cox added. "Advances in the technical pricing of risk, the creation of alternative forms of capital such as sidecars, regulatory innovation, and a series of other developments including strong sovereign ratings, have combined to make Bermuda one of the top three reinsurance centres of the world. We are known as the risk capital of the world.”

“Additionally, the credibility of our jurisdiction is reflected in the strength of its international relationships with those organizations that are shaping the future course of the reinsurance industry," Cox continued. "I refer specifically to: the International Association of Insurance Supervisors, the European Insurance and Occupational Pensions Authority, and the National Association of Insurance Commissioners. Thanks to connections with these entities that have been established by the Bermuda Monetary Authority over many years, Bermuda plays a leadership role in assisting with the development of the world’s risk industry.”

Unlike Bermuda the Cayman Islands will not seek equivalence with the Solvency II Directive, meaning that the territory will in theory attract insurers looking to circumvent the stringent capital buffer requirements being introduced by other territories.

The Bermuda government's decision has been backed by the industry with Brad Kading, President of the Association of Bermuda Insurers and Reinsurers stating the following in an online blog post:

“Don't count Bermuda out. New 10-year work permits and incentives for locating 'job creators' in Bermuda have the government's support. Bermuda's internationally active insurance groups need to be regulated by reputable, strong, robust solvency regulation and the BMA has met the test with its Solvency II equivalence program. [Entities] can't operate a successful internationally active insurance group without meeting the existing and future international regulatory standards. Kudos to the BMA for its pursuit of that goal.”

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