‘Bermuda Has Made Itself Obsolete’
Bermuda’s decision to seek equivalency with the new European Union Solvency II requirements harmonising insurance regulations will make the island “obsolete” as an off-shore domicile says an American industry veteran.
Jeff Mulholland, who runs insurance and pensions services for Societe Generale in the Americas, told the “Caymanian Compass” newspaper yesterday [Feb.20] that Bermuda would soon lose its competitive edge by “kowtowing” to the Europeans.
He was speaking as the war of words between Bermuda and the Cayman Islands over the future of the multi-billion dollar off-shore insurance and reinsurance industries intensified. Cayman Premier McKeeva Bush has said he intends to transform the Caribbean territory into “a centre of excellence” for the global industry and draw business away from Bermuda.
Mr. Mulholland told the Cayman newspaper that in terms of future developments in the industry, based on “the criteria of effective regulation and insurance expertise it will ‘come down to Bermuda and Cayman’ … emphasising that these are his personal views.”
Explaining that he supports sophisticated and appropriate regulation sensitive to the risks of policyholders and shareholders, Mr. Mulholland, argued that effective regulation does not exist in North America and Europe.
And he said Bermuda’s decision to adopt its own capital rules similar to Solvency II means that Bermuda has adopted European capital rules.
“The importance is that by kowtowing to the Europeans, Bermuda has made itself obsolete. And it is very unfortunate for them and I think it was a huge miscalculation by the Bermuda government,” Mr. Mulholland told the newspaper.
The problem for Bermuda is that in the next two years a lot of business that historically has been in Bermuda will leave and relocate to Cayman, he argued.
In particular, the need for capital efficiency in the life insurance industry and the life reinsurance business which historically has sought to provide capital relief to onshore companies in North America and Europe will lead to transactions involving Cayman, he predicted.
As Managing Director and Head of Insurance and Pension Solutions-Americas for Societe Generale, Mr. Mulholland has been involved in the derivatives and securitization markets with premier investment banks and hedge funds since 1991.
He also led the team at Goldman Sachs that created Arrow Re, their offshore reinsurance company designed to facilitate the securitization of insurance risk, as well as heading that firm’s fixed income derivatives business for the insurance and reinsurance industries in North America
Obsolete is probably too strong a word, but certainly by agreeing to Solvency II takes away part of Bermuda’s strenghts as an offshore centre. There are many companies here who will welcome the move, but there are also many smaller companies, and business lines, which do not need to conform, nor pay the expense of conforming, to Solvency II. They will 1)leave or 2) not set up here but go elsewhere. There is no doubt it has damaged Bermuda’s ability to retain, and attract new, IB.
What? The Bermudian gov’t doing something stupid? Doing something that will be detrimental to Bermudians? Say it ain’t so!!!!!!!!!
This guy, who deals in Life Insurance saying the Bermuda is Obselete.
Comic action indeed. This is supported by the Association of Bermuda Insurers and Re-Insurers.
Bermuda is not Cayman, its better than Cayman, and being in the first round of Solvency II is a coup for Bermuda.
Cayman is likely opposed becuase they are largely a Brass Plate and Small time jurisdiction; and were not considered in the first round.
Mark my words, in 3 years Cayman will be Clamouring for Solvency II equivalence.
Someone should tell Cayman that targetting & playing catchup with Bermuda is not a strategy!
Bermuda and Cayman are in 2 different leagues.
Those Caymanians are insanely obsessed with Bermuda. They finally got permission to update their constitution, got themselves a Premier and are now smelling themslves. They have a loooong way to go to catch Bermuda up… Have you ever been there? Other than 7 mile beach, the island is pretty unattractive. Reminds me of South Beach, Miami. Albeit a knockoff version.
Solvency 2 equivalence is essential for Bermuda’s internationally active insurance groups. Bermuda has maintained a different regime for the captive industry. Thus Bermuda can remain an attractive domicile for both insurance industry sectors. Bermuda’s life regulatory regime is also evolving — just as it has to in meeting international standards. Life insurance captive groups will continue to have an alternative regulatory regime. The BMA should be commended for its leadership in this area. A long road remains ahead of us. But Bermuda is on the right regulatory path. Brad Kading, President, ABIR.