Annual Bermuda Captive Conference Concludes

June 12, 2015

[Written by Kensley McDowall]

In the Captive world, Bermuda remains at the head of the pack and is well regulated and nimble enough to remain at the head of the pack in the ever changing landscape of re/insurance. Moreover, its robust yet user friendly regulatory model is exemplary. This was the message which permeated the air at the recently concluded Bermuda Captive conference, the motto of which was, “Excellence in Global Financing”, this, in the face of the fact that in its May 30th 2014 edition, The Economist suggested that the Reinsurance business is under threat.

For three days, between the 8th and 10th June 2015, close to 800, speakers, sponsors and exhibitors converged on the conference rooms and amphitheatre of the Fairmont Southampton Hotel in Bermuda in attendance to the 11th Bermuda Captive Conference. This according to Conference Coordinator, Rhona Emmerson. Of this total, one third came from abroad and stayed at the conference facility.

Simultaneously two other insurance conferences were happening at other venues in Bermuda according to Ross Webber, CEO of the Bermuda Business Development Agency [BDA]. This testifies to Bermuda’s leading position in the insurance industry and its importance to Bermuda. It also demonstrated the cross sell and the synergies between the International Business sector and our Tourism product.

According to Conference Chairman Thomas [Tom] McMahon, President of Cedar Management Limited, for this year’s conference the Bermuda Tourism theme “So Much More” is being taken to another level with the inclusion of an art display by Bermuda artists at the Tuesday afternoon cocktail reception. Additionally, attendees were encouraged to participate in a round of golf or a wake up walk at 7.00am on the Monday prior to the commencement of the conference sessions.

Premier of Bermuda, the Hon. Michael Dunkley, JP, MP, gave the keynote opening address. He stated that Bermuda is a mature captive market and in reference to Bermuda’s winning bid for the 2017 Americas Cup World Series race he noted that the teams are already on the Great Sound in Bermuda training. But, he further noted that the yachting buzz is not the only thing that is keeping Bermuda buzzing.

The Captive business is busy as well adjusting to the changing re/insurance land scape with an increased number of consolidations such as Endurance and Montpelier, RenRe and Platinum Underwriters and XL Capital and Catlin in the industry. He believes that this will further strengthen Bermuda’s standing as a major international market. That greater capital so gained together with cost savings and synergies will make the combined companies stronger and more competitive. He expects that other companies will merge.

The Premier commended the Bermuda Monetary Authority [BMA] and its CEO, Mr Jeremy Cox, for the work it has been doing in implementing effective supervision of the industry which has made Bermuda one of the first jurisdictions to be granted ‘qualified jurisdiction’ status by the US National Association of Insurance Commissioners [NAIC]. In addition, and just as important, is the fact that the BMA is committed to achieving full equivalence with Solvency II and, as a matter of fact has recently been recommended for ‘provisional’ equivalence with Europe’s Solvency II Directive.

The Bermuda Captive Conference has created a Bermuda’s Captive Hall of Fame. One hundred and forty captives [Classes 1, 2, 3 A or B] who have been active and contributed to Bermuda over the last twenty five years were recognised and certificates were presented to sixteen individuals by the Premier following his address.

There were many panel and round table discussions at the conference. Notably was a Technical Brief Discussion moderated by Muhammad Khan of Deloitte. Leslie Robinson, Assistant Director, Licensing and Authorisations at the BMA ably supported by Greg Tyers SVP at Marsh Captive Solutions and backed up by statistics, pointed out the fact that Bermuda is the top global captive jurisdiction with over 800 captive insurance companies on its register. It remains the leading domicile for captives and continues to attract quality business. The latest available figures indicate that Bermuda’s captives wrote $48.1 billion in gross premiums and reported total assets of $161.3 billion. The reported capital and surplus for Bermuda’s captives was $59.4 billion.

Mrs Robinson also stressed the importance of Bermuda’s captives going towards electronic-filing [e-filing] of annual statutory financial returns. The electronic statutory filing would not only give the regulator more robust statistics but also allows captives to file all their statistical information through one set of returns, rather than multiple filings. Mrs Robinson also stated that the e-filing work was preceded by a consultation paper in 2012 and a trial run in 2013. E-filing for Bermuda’s captives is due to commence for 2015 year end [reported in 2016.]

Attendees were also treated to a Round Table Discussion, “An Overview of Market Trends Worldwide” moderated by Robert Paton, President Bermuda Insurance Managers Association and with panelists, the Hon. Everard T. Richards JP, MP, Minister of Finance, Bermuda; Jeremy Cox, CEO of the BMA; Bradley L. Kading, President and Executive Director of ABIR and Robert Vermes CEO and Founder of The Captive Advantage LLC and President of Bermuda Captive Owners Association [BCOA].

Mr. Cox supported the Premier’s earlier comments regarding the NAIC’s granting of qualified jurisdiction status as well as Europe’s granting Bermuda ‘ provisional’ equivalence with its Solvency II Directive. He further stated that under the current international regulatory climate we can expect further convergence of standards to continue into the future. Regarding Bermuda’s regulatory approach, he said his team was building a framework which adheres to international standards while still remaining workable for the firms which operate here. This approach has now, not only become accepted internationally but, is held up as the example to follow.

In relation to the economy, Minister Richards believes that we have turned the corner. In a simple economy such as Bermuda’s, retail sales tell the state of the economy much more easily than in a more complex economy. Retail sales in Bermuda is picking up. The drivers are progressing but under head winds, winds not of our own making, which have a negative multiplier effect. We [government] have identified the factors that have led to decline and are addressing them, but we need to get people who want to believe and invest in Bermuda to make sure that the embryonic recovery continues.

There were many Speciality sessions throughout the event which focused on industry issues such as health care captives; re-structuring and re-domiciling; investment opportunities; inter-company loans between captives and parent; emerging markets; group accounts; captives; segregated accounts; emerging risks; global fronting and a look at Bermuda as a domicile for LatAm captives. These sessions were conducted with simultaneous Spanish/English translations

At a late session on the final day on Corporate Governance, moderated by Roger Gillett, Chairman of the Bermuda Branch of the Institute of Directors, panellist Mrs Shauna Mackenzie, Director , Legal, Policy & Enforcement at the BMA pointed out that Bermuda remains very active internationally with organisations such as: the International Association of Insurance Supervisors [IAIS], the International Organization of Securities Commissions [IOSCO] and the Basel Committee on Banking Supervision.

These organisations develop international governance principles and standards which the BMA takes into account during the development of Bermuda’s governance framework. Mrs MacKenzie spoke about the Insurance Code of Conduct which came into effect in 2010. The Code establishes duties, standards and requirements for all of Bermuda’s insurers and builds on longstanding practices and guidance. In particular, the Code states that the ultimate responsibility for the sound and prudent management of an insurer rests with its Board of Directors.

The final session of the event, moderated by Niall Farrell with Catherine Duffy, SVP Underwriting Manager XL Insurance [Bermuda] Limited and Lawrence Bird MD March Captive Solutions was a very lively discussion on emerging risks/Hottest Trends. The Moderator pointed out that Bermuda is the first overseas jurisdiction on the OECD’s White List. Ms Duffy stated that 2015 is, for Bermuda, the largest year for mergers and acquisitions such as the XL/Catlin merger and predicts that there is more to come.

She commented on the increasing use of Insurance Linked Securities [ILS] such as life securitisation, Cat Bonds, Sidecars etc., as “refugee money”, it come in as alternative capital, but is not alternative capital anymore as it is here to stay. It is a convergence between the insurance industry and the capital market. This is being embraced by Bermuda, allowing captives to look at alternative capital, not just the traditional areas. The wisdom behind such decisions was addressed by Patrick Tannock, Managing Director of XL/Catlin and G. Rees Fletcher, Chairman of ACE Bermuda in an earlier discussion on the Relevancy of the Bermuda Market in a Fast Changing World.

Conference Chairman, Tom McMahon expressed great satisfaction at the entire conference. In his words, “we have had a record attendance, a record number of sponsors, a record number of exhibitors and some excellent presentations. I couldn’t be more pleased”.

The conference concluded with a beach terrace dinner at which time Mr McMahon stepped down as Chair after completing his two year term of office. He passed the mantle to the new Chair with the thundering, crackling sound and the glorious sight of fireworks. This was followed by dancing into the last hours of the night.

Next conference is scheduled for the 13th to the 15th June, 2016.

- Kensley McDowall is a Bermudian Attorney and Regulatory Compliance Specialist, MD and Consultant of Caribbean Compliance Consultants [Bermuda]. kamcdowall@gmail.com www.caribbeancompliance.com

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