Is Bermuda losing its shine? New time limits on work permits could force out 10,000 workers and this could spell the start of a slow decline of the reinsurance paradise, warns Roger Crombie
Bermuda’s work permit time limits are beginning to bite. By year’s end, according to the Bermuda government, just under half of the island’s 9,900 guest workers will leave and a further 2,500 could leave by the end of 2009. It must be said at the outset that most of those people are not directly employed by the insurance or reinsurance industry in Bermuda.
Nothing will change the departure schedule. Not the desperate efforts being made by Bermuda businesses to stave off the inevitable. Not the wishful thinking by employers, local and international, whose businesses are being destabilised by their inability to keep their staff or attract their successors. Not even commonsense. For three-quarters of Bermuda’s current foreign workforce, the writing is on the wall.
(Full disclosure requires me to tell you that I am one of those who will be asked to leave, at some time between the publication of this article and, at the very latest, 30 March 2011. Although I would rather not lose my job and my home, I bear nothing but gratitude to Bermuda for allowing me to spend the great majority of the past 32 years there.)
Plugging the gap
The deportation orders appear to be purely political in nature. Logic dictates that just about every one of those departing workers will need to be replaced. Bermuda has more than full employment, and every Bermudian who wants to work has at least one job. The departing workers all have (or had) jobs that their employers found profitable, so the chances are that immigration laws will not remove these positions, which will need to be filled. The number of guest workers is therefore unlikely to decline materially; indeed, given Premier Dr Ewart Brown’s ambitious plans for the island’s hospitality sector and a steadily growing insurance market, the number of foreign workers required is likely to increase.
Government is aware of the pain its policies could cause to Bermuda’s insurance and other industries. But it does not believe that the work permit time limits will have any lasting negative affect on business in Bermuda, and that the deep concern being voiced about its immigration policies is ill-founded, according to Dr Brown and other government spokesmen.
Government does acknowledge that it will be deporting some of the best and the brightest in Bermuda. It understands that its policy will raise the cost of doing business and with it, inflation. Indeed, Bermuda’s annual inflation rate has already begun to spike upwards. Government also understands that, as a result of the work permit legislation, Bermuda will be a less attractive jurisdiction for insurance, banking and trust, which between them provide about 90% of the island’s foreign exchange earnings. It is also likely that government understands that Bermuda will lose some of its dominance in the area of captives and reinsurance.
Dr Brown is bound and determined to give Bermudians a greater say in their own country. He believes that, for too long, foreigners have enjoyed a disproportionate influence on Bermuda’s main industries, and that the time is ripe to change the status quo. Despite evidence to the contrary, he does not believe the new rules will affect Bermuda in any way other than positively.
The reasoning behind the new law is simple. Under United Nations’ regulations, anyone who has lived and worked legally in any country for more than ten years has the right to “belong”, ie the right to live in that country for as long as he or she wishes, and all the associated rights that go with “belonging”. Bermuda is not an independent country (or a member of the UN), but Dr Brown recently said independence remains an ultimate goal, although not an immediate priority. If and when Bermuda does become independent, it has been argued that government does not want its first official act to be granting citizenship to a group of highly-qualified foreigners who would permanently deprive Bermudians of the best job opportunities.
The only stumbling block is that the people of Bermuda, whose opinion in such matters is legally paramount, do not want independence, and never have. In a 1995 referendum, they voted against it by three to one. No poll has ever placed support for independence above 40% of the population. The British Government has indicated a preference for a referendum on the subject; and such a vote is at present highly unlikely to produce a positive outcome for the independence movement.
“Government does acknowledge that it will be deporting some of the best and the brightest in Bermuda
Silencing the critics
A series of recent deportations have raised fears that non-Bermudians are being unfairly targeted, particularly if they are openly negative about the government and its policies. An internationally renowned chef who made a joke about poisoning the Premier’s dinner was deported without a hearing in a few hours flat, and on his way out branded a “terrorist” by the Minister of Immigration, Derrick Burgess. A doctor who criticised the government, her employer, was similarly expelled without notice or appeal. A construction worker who did not recognise a government backbencher was deported and branded a racist. And a banker whose paperwork was not in order upon his return from a hurriedly-scheduled overseas trip chose to leave Bermuda, rather than face what he described as the continuing humiliation devised for him by immigration officials.
Minister Burgess raised the ante in the spring by announcing that henceforth any non-Bermudian who spoke out on local matters would have his or her permit summarily revoked and be promptly escorted to the airport. (Writing this article directly contravenes that policy). Making daily life even more precarious for expats are proposed new transport laws. In an effort to resolve the increasing congestion on Bermuda’s roads, Dr Brown has vowed to introduce laws that would ban car ownership by unmarried and childless expats and to limit the ownership for other expatriates. “The resolution of our traffic problems requires bold and decisive action from government and a willingness on the part of the community to make personal sacrifices,” he said in a recent speech.
Employers who cannot find suitably-qualified staff locally have no choice but to import workers from overseas if they wish to maintain or grow their businesses. Until now, they have had to fish in a limited pool: those willing to relocate. With the new time limits on work permits and growing lifestyle restrictions, this pool of essential overseas staff is likely to become even more limited.
Government determinedly holds to the notion that these policies are in Bermuda’s best interests. Others disagree, most notably officials in such places as the Cayman Islands, the Isle of Man, Dublin, Dubai, and any other jurisdiction keen to cut into Bermuda’s insurance, banking and trust business. At the Risk and Insurance Management Society (RIMS) conference this year, in New Orleans, many representatives from competing jurisdictions could barely contain their glee at what one captive manager referred to as “Bermuda’s suicide legislation”.
Also at RIMS, Dr Brown emphasised his continuing support for the insurance and reinsurance industry. “The relationship between the Bermuda Government and the international insurance and reinsurance industry is one which we have taken great care in fostering,” he said at the RIMS Bermuda reception. “For 50 years, ours has been an enduring market that has grown exponentially to become one of the most formidable and most respected in the world. And as we look to the future, I encourage you to continue to persevere to ensure that Bermuda remains at the pinnacle of the industry. I can assure you that the Bermuda Government, under the prudent stewardship of the Minister of Finance, is committed to working with you, our partners, to maintain this success.”
Given these assurances it does seem unlikely Dr Brown would knowingly damage the Bermuda reinsurance market, and by default, the long-term health of the island’s economy. He does appear to genuinely believe that businesses will replace their lost workers with little more than a hiccup, and that the work permit policy is morally correct for Bermuda. And it is unlikely that he would change his party’s position on the matter, even if he could. To do so would represent a humiliating U-turn. Dr Brown utterly discounts the negativity these policies have engendered, believing that on the contrary; the deportations will be good for Bermuda.
And it is true that at present, Bermuda offers an enviable mix of attractions for international financial services that is hard to beat elsewhere in the world. Tax neutrality, sophisticated support services, a comfortable lifestyle and a pristine reputation are some of the things that have allowed the insurance and reinsurance market to thrive. It is too early to say with certainty what, if any, affect these work and immigration policies will produce. But one thing is for sure: if the policies seriously injure Bermuda’s insurance and other financial services sectors, and if companies decide as a result to site all but their top management elsewhere, it could be decades, perhaps generations, before the damage can be undone.
Roger Crombie is a freelance journalist who has lived and worked in Bermuda since 1975.
Out of space - could Cayman lure start-ups?
Another source of concern is the lack of space in Bermuda. Following Hurricane Katrina in 2005, a number of new start-ups were set-up to take advantage of hardening rates for property catastrophe reinsurance. The majority of companies that made up the “Class of 2005” chose Bermuda as a base, but promptly discovered office space was at a premium. For a number of months, many of these start-ups were forced to use temporary offices in Hamilton because permanent space was simply unavailable. Construction of new office blocks is underway but demand continues to outstrip supply.
Interestingly, some new reinsurance ventures have chosen the Cayman Islands, already a successful captive domicile, as their base. “The benefit we have over Bermuda is that space constraints do not apply in the way they do in Bermuda these days,” points out Morag Nicol, deputy head of the insurance supervision division at the Cayman Islands Monetary Authority. One of the first start-up reinsurers to test the waters was Greenlight Re, an open-market property casualty reinsurer set up in August 2004, which has recently announced plans to launch an initial public offering. It has since been joined by numerous special purpose vehicles – catastrophe bonds and sidecars – including Lloyd’s of London sidecar Thunderbird Re. According to Warren Cabral, managing partner at Appleby Spurling Bailhache, Cayman is keen to establish itself as a preferred jurisdiction for the establishment of more traditional reinsurers.