Bermuda’s premier and finance minister talk to GR about the first year of being in power, convincing reinsurers to move back to the island, and being made a scapegoat by G20 nations
The OBA (One Bermuda Alliance) won last year’s election with a ticket of change. You inherited challenges such as high debt and lack of economic diversification from the previous administration. Nearly a year into the OBA’s rule, how do you think you have fared in confronting these issues?
Cannonier: We realised the only way out of this was to make sure we had investment coming into the country. If we don’t have investment coming in, there is no Bermuda dollar. So the first ten months, for us, legislatively and policy-wise, were about stimulating business. Because we recognised that there would be no creation of jobs without investment on the island. We knew that there were policies in place that were inhibitors to investors seeking out Bermuda. So we put in place policies that would invite them back. We tend not to call them concession plans, but they are incentives to domicile back into Bermuda. So we are very aggressively after changing policy and legislation, but it needed to be done.
What are you doing to ensure that Bermuda remains a centre for reinsurance, bearing in mind financial centres being promoted in other countries such as Dubai and Singapore?
Richards: We have laboured long and hard to provide support for our reinsurance platform in Bermuda, insofar as regulation is concerned, and legislative infrastructure. Right now the challenge continues to be Solvency II equivalency with Europe. That’s been a stop/start thing in Europe itself, but it looks like it will come to pass. We are one of three jurisdictions outside of European being included in the first round of countries that will be considered to be equivalent. That has involved a lot of beefing up of the Bermuda Monetary Authority and the regulatory regime.
In addition, the whole area of reputation is critical with us. We welcome competition. This government is comprised of entrepreneurs, people who cut their teeth in the private sector. We recognise that there is competition out there, and if other jurisdictions decide to enter the reinsurance business, they should just know they are going to have to deal with us. People who know what they are doing, have done it, and continue to be very expert and competitive. The new jurisdictions, they are going to find that it’s not going to be that easy. It wasn’t that easy for us when we started. Now we have three centres for reinsurance – New York, London and Bermuda.
I’m not saying it’s a perfect world, and no one else can get in, because that would be silly. But you’re not going to snap your fingers and have people come to you for reinsurance. It is not a commodity business, or at least not yet. It requires knowhow, expertise, knowledge, contacts. We have that. You have to have an enormous investment in time and people to recreate that.
Bermuda’s competitive advantage is its tax regime. Has the Bermudian government overcome initial concerns about sharing tax information across jurisdictions?
Richards: No, that wasn’t a concern. The concern was we did not want the multilateral convention to render the 39 TIEAs (tax information exchange agreements) that we had already laboured long and hard to sign to be redundant. The way it stands right now, the multilateral convention is a vehicle invented for countries that do not have tax information agreements. It’s a one size fits all thing. Seeing as we had this network already, we didn’t want to render our existing agreements redundant. So the way we have signed onto this thing, we have signed on in a way that our client countries have a choice. You can go down the multilateral route or you can have a TIEA route.
There has been a clamour for information from G8/G20 countries recently. I think their motivations are interesting, to say the least. But we are on board with that. What we are not on board with, we still respect the sanctity of privacy. There have been talks in circles about having public databases with beneficial ownerships, for all to access. Our attitude is that: when the US and UK do it, we will do it too. But they have to do it first.
Is there a target for how many TIEAs you are signing? Are you being put under pressure to sign more?
Richards: No, the 39 that we have already signed - and we have one not signed but agreed, with Poland - we have pretty much got all the G20 countries covered already. So I don’t think there is a great pressure to sign any more, though we might very well.
The world has become more emotional about this, tax regimes. I think it is a function of the very poor global economy. G20 countries are scrounging around for tax revenue. Dots on the map, who appear to be prosperous, are easy targets. That’s what we are, easy targets and scapegoats. One of the reasons we are here is to tell the world that we are a co-operative jurisdiction, that we have a valuable proposition in insurance and reinsurance and asset management, and that we have a very positive story to tell the world.
What would be your message to any reinsurer contemplating redomiciling to Bermuda?
Cannonier: Bermuda still is, we believe, the insurance capital of the world. We are a one stop shop. We have the support mechanisms, the great legal framework, to ensure that for reinsurance companies looking for a home, the process is made streamlined for them to set up and get on with what they do, and that’s business. That is our goal. We provide everything as well as pink sand and sunshine.
This is the place to be. If you want it done right, if you want to ensure that not only is it right for business but you have a safe place, with a low crime rate, you can bring your kids and they will feel safe and have a good education while you’re working, Bermuda has so many advantages outside of the business environment.
What would be your message to any reinsurer contemplating redomiciling away from Bermuda?
Richards: A number of companies that had their headquarters in Bermuda have moved, mainly to Switzerland. I think they are reconsidering that now. The Swiss have passed some populist laws about compensation of CEOs and directors, putting caps on those sorts of things, causing some companies some significant discomfort. If not the companies, certainly the executives. So I think that, as usual, it is a changing world. We try to remain constant in our focus on trying to provide good value and a good place for intellectual capital to take root, insofar as reinsurance is concerned. So yes, some companies have moved, and in life you can’t win them all. Wherever the CEO of a company is, that is the focal point of that company. Where he or she is, everybody gravitates to. We are on a mission to get some of those folk back in Bermuda and get the multiplier effect throughout our economy.
We will do everything we need to do to get that complete commitment to Bermuda. It will end up creating more jobs for Bermudians, which is our reason for being, as a government.
Cannonier: We needed to know from the business world: what was causing them to trickle away? The whole idea was to remove the barriers that were there, and that’s what we’ve done. We want to set policy in place, and legislation, after hearing from the affected community, whether it be business or social. Gone are the days when governments put policies in place and then afterwards asked questions.
Do you think the OBA initiatives such as fast-tracking work permits and setting up a concierge service for foreign nationals are working?
Cannonier: Sure, we have statistics to show that. Business registrations are up, since the early 2000s. We have more companies formed here in 2013 than they have since 2000. So we know it’s working.
How difficult do you think it is for Bermudianto break into the reinsurance industry?
Cannonier: I think that any Bermudian that wants to get into that field can. They just need to have the right schooling and get the experience. But the international business community has been very open to bringing in local expertise. There is a ratio that has been in existence for some time – for every expat that comes to Bermuda, two Bermudians are hired.
Richards: It is cheaper to hire Bermudians. You don’t have to pay for work permits, housing allowances, travel to and from homeland. The key thing for Bermudians is they have to get the requisite qualifications. There is no point in getting a PhD in basket weaving and then going to an insurance company and expecting to get a big job. You have to get an appropriate qualification. I think there are still significant opportunities for Bermudians in the reinsurance industry.