Bermuda making its case to policymakers globally

Among subjects discussed at the Bermuda captive conference was the potential effect of the political and regulatory climate on Bermuda captives.

SOUTHAMPTON, Bermuda—Worldwide efforts to modernize insurance and financial regulations could have a significant effect on Bermuda-based companies if the island's business leaders and top officials don't make an effective case for the Bermuda market and its regulation.

Meanwhile, confident in the reputation they've established, Bermuda regulators expect no significant changes in captive regulation there.

Speaking as part of the opening panel at the annual Bermuda Captive Conference last month at the Fairmont Southampton Resort, Paula A. Cox, Bermuda's deputy premier and minister of finance, said her biggest concern for the island's financial sector going forward is policymakers in other jurisdictions who are uninformed or misinformed about Bermuda.

Jeremy Cox, deputy chief executive officer of the Bermuda Monetary Authority, said he's concerned that as regulators around the world look to close gaps in international financial regulation, the changes don't put additional regulatory burdens on Bermuda companies. It's important to ensure that “people don't go and change something so it becomes this one-size-fits-all approach,” he said.

Facts, not opinions

Mr. Cox said there has been a “continued push” to make Bermuda a global leader from a financial regulatory perspective.

Alan Thompson, president and CEO of Bank of N.T. Butterfield & Son Ltd. in Hamilton, agreed that it's important for Bermuda's financial and insurance sectors to “make sure our story is well-communicated.”

“One of the challenges we have is making sure the policymakers in other jurisdictions are acting on facts and not heated opinions,” Mr. Thompson said.

As part of the effort to make sure those policymakers are properly informed, Bermuda will establish a lobbying presence in Washington, Ms. Cox said. “It's not going to be overly bureaucratic,” she said. “But it is going to be somebody who knows the scene and can help us to get the job done.”

Speaking on another panel examining regulatory developments, Shelby Weldon, director of insurance licensing and authorization at the Bermuda Monetary Authority, noted that—although efforts to update insurance regulation are advancing in the United States, Europe and around the world—there are no plans to change the way Bermuda regulates captive insurers.

“With increased success of the Bermuda market, there has been increased international scrutiny,” Mr. Weldon said. But, he noted, “Bermuda has over 35 years of effective captive supervisory experience.”

Most of the regulatory enhancements anticipated in Bermuda in the near future will focus on the commercial insurance sector, Mr. Weldon said, as Bermuda's regulation moves to an increasingly risk-based approach.

“But, for the most part, we intend to leave our captive regime unchanged,” he said.

Mr. Weldon noted that the International Assn. of Insurance Supervisors has taken up the question of what constitutes appropriate captive regulation, with the Bermuda Monetary Authority participating in an IAIS subgroup that produced a guidance paper on captive regulation consistent with Bermuda's existing approach.

“Our goal is to be in a position to proactively manage the scope and nature of any changes that we might be required to consider,” he said, adding, “Bermuda has no immediate plans to change the way we supervise our captive market.”

And, Mr. Weldon said, “Prior to any changes taking place, the BMA will use what it has always used, which is consultation with the markets.”

Tax haven legislation

Bridget Gainer, director of government affairs for Chicago-based Aon Corp., discussed several measures pending in the U.S. Congress that could affect the captive and other insurance and reinsurance business in Bermuda. Among them, she said, is the Stop Tax Haven Abuse Act introduced by Sen. Carl Levin, D-Mich.

The senator argues the bill would bring an additional $100 billion into the U.S. Treasury annually by closing loopholes he says companies are using to avoid U.S. taxes.

With Congress looking to raise revenue to offset the cost of anticipated new spending in areas such as health care—and subjects such as reinsurance being little understood by members of Congress or their staffs—Ms. Gainer noted that raising revenue “out of the financial services industry and out of the financial services industry that's not based in the United States” would not be “the most unattractive target” to many in Washington.

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