Bermuda’s Premier and Finance Minister discuss the island’s insurance industry and its relationship with the UK market.
The London market relationship, passive facility deals and UK insurers redomiciling were all on the agenda as Post caught up with Bermuda Premier Craig Cannonier and Finance Minister Bob Richards this week.
What is the state of the relationship between the UK and Bermudian insurance markets and what are the current challenges?
Richards: The best word to describe the relationship is symbiotic. I was asked yesterday about the competitive situation between Bermuda and London, and the industries have worked very well together and have built each other up.
The whole idea of reinsurance is to spread risk to reduce the exposure of underwriters, and the relationship between Bermuda and Lloyd’s has done that very effectively. That relationship continues to gather strength. We have been fortunate in Bermuda to receive expertise from people in Lloyd’s, and what Lloyd’s has received from Bermuda is capital.
Do you predict more UK insurers will domicile to Bermuda, and is it something you are targeting?
Cannonier: The key for us is to make sure we remain an option, and that involves regulation and all of the supporting factors that make businesses thrive.
We have always been a domicile of quality over quantity. It has never been a case of us trying to get the lion’s share of a particular market – it has been about providing a quality product and service. [So long as] we keep on top of our game in the competitive market, we [will remain] a choice.
What are you doing to attract UK firms to Bermuda?
Cannonier: In December 2012 we formed an economic development committee, and that is about streamlining processes. The other thing is regulation, and so we keep on the cutting edge of what is needed to make business thrive.
Richards: We are not out to spirit away insurance entities from London. That perception would not be correct. We have had a long relationship with members of Lloyd’s.
In Bermuda, reinsurance sidecar deals are not uncommon. What is your opinion of passive broker facility deals in the Lloyd’s market, and do you think they will work effectively?
Richards: It has been successful in Bermuda and I would expect that it would be successful [in the UK]. Bermuda has been a laboratory of change in the industry, so it is not surprising that this happened first in Bermuda and has now been adopted elsewhere.
How is the captive insurance market progressing in Bermuda?
Richards: Captives were the genesis of the insurance sector in Bermuda, and there would be no reinsurance business in Bermuda had it not been for captives. We are still the captive leader, but the captive market is not the part where we have the most companies and the biggest capital – they are the class-four reinsurance companies. The captive market is growing, but more slowly than it used to. We have a lot more competition with captives now [from the US in particular].
How has the implementation of Solvency II impacted the Bermudian insurance market?
Richards: The drive to get Solvency II equivalency has resulted in a very significant increase in regulatory profile, and we have had to beef up the Bermuda Monetary Authority significantly in terms of its resource so that Bermuda reinsurance companies can meet Solvency II equivalency status. We think we are there now, and Brussels does too.
Bermuda’s recovery from the global financial crisis was predicted by the end of 2013 and into 2014 – is that timeline still realistic?
Richards: It has been a challenge but it is starting to work. We can enable businesses to grow and attract them to Bermuda, and we can increase government revenues without increasing taxation. This year we are starting to see some signs of recovery in the private sector in Bermuda. The reinsurance business has been solid throughout the whole episode and if it wasn’t for this we would be in real trouble.
What are the growth plans for the Bermudian insurance sector in the near future?
Cannonier: Some may have felt we have saturated the market as much as possible, but there is always room for growth and the market is always changing. We have more opportunities in the fund and asset management area. We will always be a domicile for the captive and reinsurance market, and so that will be something we will look to expand on.
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