Premier’s Remarks: BDA Captive Conference

Premier and Minister of Finance Paula Cox delivered the opening remarks for Bermuda Captive Conference. Her full remarks follow below:

Ms. Husbands thank you for that kind introduction and for the opportunity to address the 2011 Bermuda Captive Conference.

Let me start by saying … What a difference a year makes! When I addressed this meeting as Minister of Finance 12 months ago … the world economy was not where it is now … neither was the Bermuda economy and neither was I.
It is not just that I have now had seven months as Premier … not just that the view from behind the steering wheel is not quite the same as the view from the passenger seat. I think I realised that much going in.

But what none of us knew … was that the rapid pace of economic change … which had begun with the financial collapse in 2008 … would continue to sweep through many of the world’s biggest economies … leaving a devastating trail of unemployment … sharply increased national deficits … and massive public sector dislocation in its wake.

As Bermuda reeled under the weight of a recession whose depth and complexity confounded economists all over the world … the Bermuda Government unveiled a no nonsense budget … proposing a raft of measures designed to get the economy back on track. These included among other things … a reduction in payroll taxes … and public spending cuts of approximately $150 million.

I also knew at that time … if you will permit me to borrow a phrase from Mr. Obama … that we would not be able to win the future with a government of the past. What was needed was not just a government that was more affordable … but a government that was more competent and efficient.

Accordingly … following my appointment as Premier … I re-shaped several Ministerial functions … and created a new Ministry of Business Development and Tourism. Leveraging synergies between tourism and international business … this was charged with strengthening the pillars of our economy … finding ways to enhance our competitiveness … and establishing new sources of business.

The overall reorganisation reflected a more needs-driven focus for public service delivery … and a strategy to align resources into one strong … cohesive group. The aim of these changes was to create operational centres of excellence … to deliver better value for money and … ultimately … to strengthen Bermuda’s competitiveness as a jurisdiction.

Indeed … the ability to compete is a constant driver of initiatives in the public sector. Our drive for greater efficiency led us to invite the UK’s National School of Government to conduct a review of the civil service recently. Our drive to influence labour costs led us to seek improved relations with our unions. Our drive to give better value for taxpayer dollars was the trigger for improved tendering and project management processes for capital projects. More recently … our drive to help bring people together at a time when worsening crime is threatening our communities … led to the formation of a newly mandated Ministry of Community Development.

Despite … or perhaps because of recessionary pressures … there have also been distinct moments of opportunity for Bermuda … moments when we realised that the music had changed … and the time had come to learn some new dance steps. What I saw was that … as countries scrambled to deal with their economic problems … as tensions steadily worsened in the Middle East … as bailout followed bailout … and unemployment showed few signs of abating in the US … Bermuda grew increasingly attractive as a long-established … stable business jurisdiction.

We probably don’t say this often enough … but in the context of what we see currently playing out around the world … a safe and welcoming professional environment for business probably becomes a mission critical factor for many of you. Are we magically exempt from social and economic challenges? Of course not. But it is widely appreciated that it is not for nothing that we remain the largest of the captive insurance jurisdictions … that we have a deep pool of insurance talent … unrivalled in the insurance world … and that we are generally considered to be one of the more welcoming captive business centres.

The Government has also been careful to deliver a foundational message … applying to all sectors of our economy … that we are open for … and open to …business. I tried to make sure that this was heard loudly and clearly at RIMS this year.

I said a moment ago that I was grateful for the opportunity to address the Bermuda Captive Conference. That was no platitude. Sometimes timing is critical and I am particularly pleased and proud to be able to stand before you at this precise moment … literally just days after two highly significant events took place on the Island.

Let me hasten to add that the Bermuda Captive Conference is no less significant an event …but my reference is to our hosting last week of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes … and to the visit of a team of EU regulators … who conducted a week-long on-site assessment of our insurance supervision regime … which … as many of you know … is seeking equivalence under Europe’s Solvency 2 directive.

The headline on a report in our local daily newspaper … about the OECD meeting last Wednesday … boldly proclaimed: Bermuda hosts the world. Quite a headline wouldn’t you say?

The daily was not the only one to be impressed by the influx of more than 250 OECD officials and their supporting delegations.

The rating agency A. M. Best last week publicly congratulated Bermuda’s regulators on the insight they have demonstrated in pursuing Solvency 2 equivalence. The agency said that our commitment to achieving equivalence has changed perceptions about Bermuda and has shown that we are not … to quote A. M. Best … fooling around.

Regardless of your view … irrespective of whether you think Bermuda derives long-term benefits or disadvantages from opening its doors in this way … the mere fact that these events took place here at all tells us something about the shifting … and occasionally fickle nature of geo-politics … and about leadership and the growth and current stature of Bermuda.

Some would say that it is perhaps inconceivable that meetings such as these … conducted at such senior levels as these … with such ambitious objectives as these … could have taken place here a few years ago. If that is true … my question is: what has happened to change things around?

The short answer … is that what took place last week … and what you will see being played out through the balance of the year … is the result of a lot hard work on the part of the Government … the financial services regulator … and the private sector. Hard work and … of course … an element of risk taking.

While a great deal of energy has gone into making sure that Bermuda’s role in the world’s financial services industry is widely understood … safe bets are rare in geo-politics.

It was the writer T. S. Eliot who said that only those who risk going too far can possibly find out how far one can go. That is not to say that caution is being thrown to the winds. It is not. We are not and never will be in the business of adopting inappropriate strategies or regulations in order to achieve a quick win.

However … the responsibility of leadership will sometimes require that we step outside our comfort zone. For example the Bermuda insurance market’s claim to be the risk capital of the world … encourages certain expectations among those who look to us to provide something more than plain vanilla solutions to their risk management challenges.

The risk management industry in Bermuda is one that well understands these demands. So too does the Bermuda Government.

On top of an established tradition of insurance … we have also stressed the strong tradition of legal and political stability.

This … along with a muscular professional services sector …comprising law firms … accounting practices … investment and management companies … has long helped to provide an environment appropriate for sustained growth and innovation.

So how are we doing? Are we continuing to attract new insurance businesses? The answer is an unequivocal yes. While the numbers have still to be officially announced … it is my understanding that insurance registrations for the first five months of this year are already close to exceeding the total number of insurance registrations we announced for the whole of 2010.

But of course … even an industry as innovative as the Bermuda insurance market … needs occasional support to help it achieve its goals. That’s where we come in. For our part … the Bermuda Government plays a major role … sometimes publicly … sometimes behind the scenes … in helping to sustain and facilitate growth.

Here’s a very good example. On the domestic front … we are considering changes to our work permit regime to help make Bermuda more attractive to new and existing businesses.

Specifically … we are looking at providing increased incentives to job-makers and providing more security of tenure to those who provide meaningful job opportunities to Bermudians in the work-place.

Still on the domestic front … my Government recently extended tax exemption undertaking legislation to the year 2035 … providing international businesses with considerable comfort about their future in Bermuda.

The Bermuda Government has also been very active internationally … with our Ministry of Finance concluding 24 Tax Information Exchange Agreements … and one double taxation agreement.

Agreements have been reached with the United States, Australia, the United Kingdom, New Zealand, the Nordic countries (Sweden, Norway, Finland, Denmark, Iceland, Greenland, Faroe Islands), Netherlands, Germany, Ireland, Netherlands Antilles, France, Mexico, Japan, Portugal and Canada. Just last week, the Canadian Government indicated that our TIEA with them will enter into force on July 1-Canada Day. This has engendered much interest and excitement amongst Canadian businesses

Being known as a jurisdiction that is willing to sit down at the negotiating table and discuss information exchange is an important part of our brand. Captives … of course … are also a major part of that brand … as is the risk transfer element of our market.

With four of the top 20 biggest global reinsurers in the industry … an asset base of $496 billion … capital and surplus of $250 billion … and a global workforce of 17,000 … our risk transfer industry is legend … a massive success story for our Island nation.

Nothing succeeds like success … and Bermuda’s reputation as a highly successful insurance centre has been a huge contributing factor to the high esteem in which it is held.

I believe there is no more effective magnet for business than a solid reputation and a world class image of financial strength … stability … integrity and expertise. These have long been the hallmark of the Bermuda brand and will continue to speak volumes about us.

Interestingly … I really don’t think many of us fully appreciated the power of our brand until we saw how well it withstood the economic setbacks that have rocked the world. Bermuda’s adaptive speed and its well known ability to quickly reinvent itself are also major elements of our value proposition.

I mentioned moments of opportunity. I would like to leave you with the tongue-in-cheek thought that when captive insurance makes the front page … yes the front page of the New York Times … as happened in a not very complimentary article last month … maybe the moment of opportunity has arrived to rename the industry. But here’s a tip. Think of something a little less catchy than captive. It fits into a headline far too easily.

Ladies and gentlemen … I’d like to congratulate you on what looks to me like being another highly successful conference held in the 3rd largest insurance market in the world. I wish you well in your deliberations and look forward to welcoming you back next year.

Thank you.

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Category: All, Business