Frustrations continue in telecoms in Bermuda, but e-commerce surges ahead as Roger Crombie explains.

Attempts by the previous government of Bermuda to introduce meaningful competition in telecommunications have largely been defeated, but Bermuda-resident companies and individuals are used to high prices, so much so that the telecoms issue has failed to generate much heat. The focus, instead, is on e-commerce, with all the players assuming that the connection problem will be resolved in due course.

In the telecoms saga, Cable & Wireless has been joined in the long-distance arena by TeleBermuda, which the former government granted about a quarter of the market by handicapping C&W from competing on rates or services with TeleBermuda. But TeleBermuda bases its rates on C&W's, so international call rates, whichever provider is used, remain among the highest in the world.

TeleBermuda's parent company GlobeNet launched its $1 billion undersea fibre optic cable linking North and South America via Bermuda on 4 May and said that another cable might be built connecting Bermuda with western Europe depending on feasibility studies.

Call-back systems operating through New York, though illegal, are siphoning foreign exchange from the economy. The island's two internet service providers have been canvassing government to allow them access to the long-distance market, without success.

Domestically, the long-established Bermuda Telephone Company Ltd (‘BTC', now a unit of a renamed holding company, KeyTech) has seen off Quantum Communications, its main competition, which is now up for sale having collected just 50 clients. Following the reinstatement of its monopoly, BTC has raised basic line rentals.

The new government having no stated policy on the matter, the issue of telecoms pricing is in the doldrums. However, not so the race among IT service providers, local and international, to establish a beachhead in the burgeoning Bermuda market.

Full steam ahead
Ross Gow manages reinsurance issues for Sherwood International in London and Sherwood ISS in New York. Sherwood, a supplier of, among other things reinsurance software solutions, was nominated as the Financial Times company of the year in 1998 and was the fastest growing insurance software stock on the London Stock Exchange in 1997 and 1998.

Mr Gow says his company “continues to be attracted to Bermuda, a marketplace possessing not only a wealth of intellectual and financial capital but also a pool of London-trained underwriters.” He points to similarities between the London and Bermudian markets, both are physically compact and each enjoys the presence of a number of accessible mega-corporations.

“Bermuda, however, is in a position to steal a march on London,” says Mr Gow, “by offering leading-edge products and improved customer service, unencumbered by the emotional baggage of failed initiatives such as EPS (in all its guises) at Lloyd's, and the distant promises of the network triumvirate LIMNET, WIN and RINET.”

Bermuda's geographic location initially drove the need for reinsurance practitioners' investment in technology, but greater benefit now needs to be derived from existing initiatives such as The Bermuda Insurance Data Service(BIDS), described in more detail in the December1998 issue of Global Reinsurance, and Bermuda Connect. “Bermuda has in its grasp a technological solution which, if it included a fully functional business, rather than technical, specification, could set a global precedent for e-commerce,” Mr Gow adds.

IT now defines the nature of non-traditional reinsurance placement and a new paradigm exists for the global management of risk. Traditional distribution channels have altered significantly and use of the internet as a major distribution channel and enabler is repaying deeper analysis.XL Capital and Aon, for example, have set up InQuisLogic Inc in the United States to develop a computerised system and database that allows companies to evaluate a wide range of risks, transmit documents and transact insurance business over the internet.

“Wide, cheap and secure data distribution is certainly key to enhanced underwriting performance,” Mr Gow says, “and this can be most readily achieved by marrying data warehouse applications to web technology. To retain its (disproportionately) pre-eminent position, the island needs to continue to leverage the drivers of its competitive advantage.”

Claire Green, ceo of the Insurance Cybercentre, an online source of insurance related reports, has recently completed a six-month survey of the island's readiness for e-commerce. “Insurance technology is an ever evolving and constantly growing tranche of the traditional software and hardware industrial sector, with specialist software products being developed on an almost daily basis,” she concluded. “Yet the industry still lags far behind other financial service sectors in its adoption and integration of even some of the most fundamental products and services. Bermuda, happily, is in many ways far ahead of its peer group in terms of the utilisation of technology relative to the size and global position of the insurance and reinsurance companies domiciled on the island.”Bermuda's combination of technological and financial sophistication is the reason that UK based internet applications organisation, World-Wide Intellectual Resources Exchange (WIRE) has chosen the island for its largest project, which is an alternative risk transfer/finance and weather trading internet portel site. Called Artemis (, the site was launched in Hamilton on 12 May.

WIRE managing director Rowan Douglas says that initially it will not be a trading site but the technology is available to make it one. “We feel it is much too early for that. The initial emphasis of Artemis is liquidity of information between the wide range of people interested in this market. Trading will only happen once the opaqueness is removed.”

At ROOM Underwriting Systems Ltd, which has been supplying specialist software to the insurance market for nine years, product manager Lisa Watson sees Bermuda as of particular importance for her company's global development, since it is in many cases the location of rapidly-growing financial services organisations. “This growth and consequent geographical expansion have meant that Bermuda businesses can have subsidiary companies in many different countries, taking advantage of different markets.”

But she points out that delivering the software is only part of the overall solution. “Many of our key staff are focused on maintaining customer relationships,” she says. “This not only means ensuring that their software runs smoothly day to day, but also includes data shipping services, training services, disaster recovery, hardware support and house-keeping, plus regular product releases.”

The vendors' well intended attention to their customers' needs can cause what Ms Green describes as “vendor fatigue”. She sees parallels between the Bermuda insurance market and the London market. “Both have discrete groupings of very large corporates to whom every software consultant, manufacturer and distributor turns for product endorsement and marketing spin, thereby ensuring that these insurers/reinsurers are kept busy constantly evaluating and re-evaluating services and products for applicability to their existing IT infrastructure and confluence with their business objectives.”

She has also identified another potential problem in the proliferation of service providers. “While insurance systems managers in Bermuda are often keen to take advantage of the newer technologies that allow for more open-facing communications, better quality management information and faster processing times, the business managers are struggling to place the technology within the context of their own business-driven objectives and financial returns because they are simply overwhelmed with the myriad of options on offer to them,” she says.

Home grown
Because of the island's small size and remote location, Bermuda has long tended to import systems and solutions from overseas. But a growing number of companies are locating on the island, bringing solutions from across the road, rather than across the Atlantic ocean.

First Atlantic Commerce Ltd (FAC), a subsidiary of CCS Group Ltd, provides Bermuda companies with e-commerce solutions, but is concentrating its marketing efforts on the rather larger community outside Bermuda as a provider of payment-related services to the online world. “Internet-based merchants stand to gain the most from going offshore, because it is relatively easy for them to set up,” says FAC co-founder and senior vice president, Andrea Wilson.

She points out that internet-based suppliers can choose their business domicile. Although FAC does not advise on tax and other corporate structural matters, its president Greg Vasic points out that, the corporate architecture can be as important as the electronic for internet-based merchants. FAC has attracted clients from the Caribbean, Europe and Canada.

Despite the short term regulatory hurdles resulting from state regulation of insurance and reinsurance in the US, Mr Vasic sees the new paradigm as a real opportunity for international insurance e-commerce. “How can the US regulatory issues be overcome?” he asks. “One way is a partner web site with a broker licensed in all 50 states. Another, of great relevance to captive insurers, is to regard e-commerce as an efficiency mechanism which transfers the administrative system from the back office to a net-based collection system.” The opportunity extends to government services, Mr Vasic adds.

Thinking, rather than looking, years ahead, Mr Vasic and Ms Wilson see almost limitless opportunities for Bermuda and the other offshore centres. “Internet-based businesses which benefit from the offshore environment generally fall under retail or consulting and corporate services,” says Ms Wilson. Insurance is an ideal candidate. “In essence, companies must think global. There are so many online services already in existence which could do business just as easily offshore as they can onshore in their own home jurisdiction.”

Logic Communications Ltd was the first, and remains the largest, Bermuda internet service provider (ISP) and manages the first certified offshore payment transaction gateway for e-commerce. Since becoming part of the KeyTech group in November, 1997, Logic has broadened its remit to provide full-service systems integration, data management and internet-based communication solutions for Bermudian companies and offshore corporations with a presence in Bermuda.

“The world wide web is the fastest growing part of the internet,” says Logic's Sabrina Phillips. “Web sites can immediately capture attention and present a clear, compelling message - at a very affordable price. That is why so many businesses are using the web to promote products and services, conduct electronic commerce, improve time to market, provide technical and customer support, reduce order processing costs and provide updated information to business partners and prospects.”

She continues: “The rapidly expanding medium of e-commerce is definitely more than a flight-of-fancy. It is becoming a must for progressive companies to build profit and productivity.”

The internet is changing everything, except the attractiveness of offshore to those who can take advantage of it. For the insurance and reinsurance industry, the payment of premiums by cheque may in short order go the way of the dinosaur. Once the impact of year 2000 - whatever it may be - has passed, e-commerce will redefine the way most service industries earn their living. Bermuda, which has already attracted a powerful cadre of e-professionals, has staked out its claim to play a significant role in the electronic future.

Roger Crombie is the Bermuda correspondent of Global Reinsurance, a regular contributor to local and international publications and the author of a history of the Bermuda law firm Conyers Dill & Pearman. He is also a fellow of the Institute of Chartered Accountants of England and Wales.