Right now, the Bermuda market is facing wholesale changes, says Brian O'Hara. A few years from now, the industry and the players within it will look quite different from the way they did when they were established in the mid-1980s.

Of course, one of the greatest sources of change has been the convergence of banking, insurance and reinsurance. The blending of finance and insurance principles has allowed us to look at our business in a whole new light. We can offer solutions that were unimaginable just a year ago.

It has given us access to tremendous new sources of capital. And it has allowed us to be more creative in serving our clients. In fact, some people in our organisation do not even want us to use the word "insurance" anymore, since it too narrowly defines our capabilities.

Changes are also a result of the constant mergers and acquisitions taking place within these categories. Resources and expertise are being concentrated under fewer and fewer banners. Everyone benefits - customer and carrier alike - from combining the talent needed to build integrated programmes. At the same time, it continues to feed everyone's interest in strategic acquisitions.

Finally, our customers are changing. Rather than primarily managing traditional event risk - property and casualty etc - by purchasing annual insurance capacity, risk managers are moving toward a broader mandate of protecting earnings and shareholder value from all forms of enterprise risk, including financial and business exposures. What is more, the continued soft market has put customers in a position to demand innovative approaches that are more finely tuned to their specific issues.

Success is dangerous

The way we see it, all this change is either your friend or your enemy. Unfortunately, status quo thinking is still far too common. As markets change, the established leaders are often the ones most blighted by their past successes. In other words, those whom the gods would destroy they send 20 years of good earnings!

Of the 100 largest US companies in 1917, only 15 survive to this day. Besides six oil companies and two auto makers, there are AT&T, DuPont. General Electric, CitiCorp, Kodak, Proctor & Gamble and Sears. The other 85 went bankrupt or were liquidated, acquired or left behind.

Today, with advances in technology and communication, change takes place at an even faster pace.

So how can a company in Bermuda make sure change is our friend? We have to evolve in order to stay in the running. Fortunately, this is where the unique advantages offered by our offshore status - agility, lean operations, regulatory efficiency - position us well for the future.

Our role has become one of partnership - working with our customers to customise long-term holistic risk solutions tailored to a corporation's specific financial and business exposures. There's a need to be faster, broader, more efficient and more effective. At XL, we have tackled these new circumstances head-on, by moving from a "product" focus to a clearly customer-driven approach, realigning our entire organisation in the process.

Through focusing on our customers' needs within their industries, we can learn more about their cultures, emerging issues and how their concerns are different from those of other customer groups. When we sit down with a client, we are ready to map out answers to the questions they may not have even thought of yet.

We can take ongoing exposures off their balance sheets, effectively improving their credit ratings and smoothing their earnings. We can offer multi-line coverages that offer portfolio pricing and greater leverage. The challenge is in integrating event risk with financial and business risks - finding non-correlating risk pricing efficiencies and incremental risk transfer.

What sorts of programmes will we be putting together 10 years from now? It is hard to say, given that our industry did not even exist 15 years ago.

Managing growth from Bermuda

Of course, nobody knows what the future holds. But we feel that, going forward, Bermuda businesses remain well poised for just about any eventuality. We have been careful to acquire companies with top-flight management already in place. This allows us to run a fairly decentralised operation. At the same time communications advances, such as video conferencing, have made it possible to work closely together without having everyone headquartered on the island.

After all, there is a limit to how many people Bermuda can accommodate. The demographics and the island's infrastructure are finite. The new headquarters we are currently building, for example, would only allow for our current rate of growth for the next five to 10 years.

But that does not mean we cannot continue to grow exponentially through our operations in the United States, Europe and the Far East. As our efforts there mature, I can see a substantial amount of our operating activities shifting to the locations of our customers and their risks. But Bermuda remains fertile ground as a venue for a financial service and insurance holding company. The tax and regulatory advantages for a company like ours - operating on a global scale - continue to make our presence here worthwhile. The formation of the Catastrophe Exchange and Bermuda Commodities Exchange further cement Bermuda as a powerful presence going forward.

The key is maintaining complete flexibility. We want to be able to react quickly, but not rashly. We need to be able to redefine virtually any aspect of our business, our industry or our processes when the market necessitates it. We need to continue to learn, so we can stay ahead of the curve. As far as I am concerned, that is more a corporate state of mind than anything else. And that does not have anything to do with where your company has its headquarters.

Brian O'Hara is president and ceo of EXEL Ltd.