Bermuda’s premier has a reputation for pulling no punches, particularly with the business community on the island. But his message to the reinsurance industry is unexpectedly affable
So the story goes: the premier of Bermuda was in a private, off-the-record meeting with some reinsurance chief execs. After a couple of hours of wrangling, he banged the table and said distinctly: “I don’t want expats living on my island.”
Even if those in the business community who have worked closely with him scoff at this second-hand tale, its very existence says something about the nature of the relationship between the premier and the businesspeople who make up 25% of the population of this small island.
So it is with some apprehension that Global Reinsurance rocks up at a hotel on London’s glamorous Park Lane to interview him. In the quiet lobby, a couple of Russian teenagers chatter away and two ladies in Balenciaga are lunching. Premier Ewart Brown’s friendly press officer appears with a smile, and it’s up to an unpretentious suite on the top floor where Brown, soon enough, appears.
As leader of the PLP (Progressive Labour Party), Brown has introduced a handful of policies that have been unpopular with reinsurers – namely, the rise in payroll tax and the doubling of the threshold. Brown is identified with left-wing values and standing up for the country’s black majority, and to the wealthy white visitors who push up prices and pay so little tax.
Of course, there’s more to it than that. Just as the reinsurers based there need Bermuda, the island needs them – and Brown knows it. With just six months left to serve (he has made public his intention to stand down in October), he reckons it’s time to turn things around – and has a plan to do just that.
Cool and collected
It seems there is no need for trepidation. Brown cuts a relaxed figure, very Bermudian in blazer and t-shirt with shades on a cord round his neck. He’s smiling, friendly – there will be no banging of tables today. It’s hard to imagine him putting down a Bermudian reporter, as he once did, with the rebuff: “That’s a plantation question.”
A what? “A plantation question is, for me, a question that conjures up images of the plantation: of a master-servant relationship, a man-boy relationship. A question that would be asked of a black politician and now a white one. I will continue to indicate to reporters if that is what a question is.”
There’s none of that today, though, on the safer shores of reinsurance. Still, there’s the odd tricky question to negotiate. Such as, how did his policy of raising the payroll tax from 14% to 16% and doubling the payment threshold to $750,000 go down?
“Nobody likes taxes,” he shrugs, with a resigned air. “But then, there’s been no indication that they won’t absorb the tax.” So, they might not like it – but they’ll pay up.
Is this the big hit – or is there more to come? “I don’t think so,” he says, smiling. Music to the ears of the industry. But, hang on – that doesn’t necessarily mean they won’t have to pay more. “To the extent that the Bermudian government would like to benefit from the presence of these companies, we can find creative ways that do not involve taxation.”
Ah, “creative ways”. This intriguing policy, Brown explains, is currently on the table, with the government taking soundings from industry leaders. He explains further: “My idea is that we would form a menu and everything on the menu would come at a price. To use the simple example, one company may wish to make use of a special line at the airport, a dedicated service just for people who are in the financial services sector, and if they wanted to take part in that, they would have to pay. If they didn’t, they wouldn’t.”
Food for thought
The idea of a menu – you pay your money and you take your choice – extends much further than the glamorous sounding idea of a dedicated airline, however. Brown says it could also include more relaxed immigration rules, which, given the current six-year term limit for non-resident workers, would be a boon for reinsurers – albeit at a price.
“It would be just like going into a restaurant, paying a fee for a service, a fee for privilege – that’s where we moving.” And in Bermuda, where the bill for a cup of coffee can make your eyes water, people are certainly used to paying for service.
The industry has been cautious in its response, however. “On the face of it, it looks like a positive thing,” one reinsurer chief executive says, “but we’ll have to wait for the detail, as there could be things in there that would work against us.”
One of the other options being floated would see the current six-year term limit for non-resident workers extended to 10 years; the immigration minister is consulting on this at the moment. Brown indicates it will go ahead, but as part of this wider deal, and perhaps with other restrictions in place. “I don’t want it just to appear as an isolated concession – I want it to be part of a new arrangement,” he says, showing scant sign of winding down in his final six months in power.
“One of the reasons behind term limits in the first place is that we wanted to get away from the situation the previous government had gotten us into, which was having people in Bermuda for 20 or 30 years, in a no-man’s land as far as citizenship was concerned. Some say there’s a way to avoid that up-front by having the person sign the appropriate documents to say they have no expectation or guarantee of citizenship. That’s what we’re talking about.”
Behind all this talk of reasonable compromise is an implicit admission that relations between the Bermudian government and the financial services community have not always been easy. Indeed, Brown talks openly of an “edginess” between the two, and hopes his legacy will be to end it. “I don’t think everybody will ever be perfectly happy, but I think we can do more to decrease some of the tensions that exist,” he says.
Quite apart from any tensions at home, reinsurers in Bermuda under Brown’s watch have had to face a massive increase in scrutiny from governments abroad – and here, he is fighting their corner hard. The most obvious pressure is coming from the USA, where president Barack Obama has openly voiced his concerns about offshore jurisdictions, while the Neal Bill is attempting to end the tax benefits.
Is he worried? “So far, so good,” he replies, still relaxed, still smiling. “In that last reading, the [Neal] Bill did not enjoy significant support. Of course, if the president appears to be behind it, then we would expect that our job would be more difficult.”
Does he think that’s likely? “It’s a possibility, but we haven’t seen any indication that he’s prepared to do that at this time.”
Brown says he has not had any personal conversations with Obama about the Bill, but the government is in regular contact with the president’s staff. Even if Obama does not support it, he has still proposed a number of tax penalties on offshore companies in his 2011 budget. Brown says: “The industry captains have said that if the taxation that is being considered is that which showed up in the budget, they could live with it – which was good news for us.”
Another major concern for Bermudian insurers is that the island’s regulator, the Bermuda Monetary Authority, should be granted equivalent status with European regulators under the Solvency II directive, due to come into force in 2012.
Brown initially says he is optimistic this will be the case but, displaying a touch of that reputed prickliness for the first time, he adds: “I expect the goal posts will shift, because I think the ultimate concern here is money. I think there are some players – I don’t know who they are – who believe that the so-called offshore jurisdictions represent a challenge for them, and they are determined to make life more difficult for us.”
If that sounds a touch like a conspiracy theorist, you can’t really blame him. Bermuda has had it hard over the past couple of years, providing a convenient scapegoat for the anti-finance feelings that arose from the credit crunch.
But, ever the politician, Brown remains upbeat. Does he have a message for the reinsurance industry? “My first message would be: relax,” he says smoothly, leaning back in his chair and grinning. “Work with us, and provide genuine opportunities for young Bermudians to enter and grow in the industry, and we’ll be fine. The business community has been so accustomed to hiding their happiness that no one knows how they really feel – usually, the government just hears when they’re unhappy.
“But I happen to believe they’re very happy living and doing business in paradise. Other jurisdictions may offer what they will, but I have a feeling that these men and women love Bermuda.”
Men and women of Bermuda – it’s over to you. GR