NU Online News Service
NEW YORK –The head of a Bermuda reinsurance company said that “intelligent regulation”–not freedom from paying U.S. taxes–is what has attracted a wealth of capital to the island.
“When you look at regulation in the United States and some other places, you realize how dysfunctional [and] how hostile regulation is outside Bermuda,” said Donald Kramer, chairman and chief executive officer of Bermuda-based Ariel Reinsurance, during a keynote speech at an insurance gathering here.
Mr. Kramer spoke at a joint luncheon of the Association of Professional Insurance Women and the Insurance Brokers Association of the State of New York.
He asserted that of the $19 billion of new capital raised in the global insurance and reinsurance market in 2005, $10.1 billion went to Bermuda, with only $900 million going to the rest of the world. He added that $8 billion went to the formation of new companies, all in Bermuda.
Giving examples of the type of “dysfunctional” regulation that exists in the United States, Mr. Kramer noted that he recently spoke at an educational session for the Professional Liability Underwriting Society. In order for the attendees to get continuing education credits in the state of New York, Mr. Kramer reported that he was required to certify under oath that he did not have any unpaid child support payments.
Providing another example, he noted that when outgoing N.Y. Insurance Commissioner Howard Mills was in Bermuda earlier this year defending state regulation, Mr. Mills acknowledged that New York, which hasn’t adopted some NAIC model regulations, is therefore not an accredited state for NAIC examination purposes. “If [New York] can’t get it together, he is the poster child for federal regulation–for getting uniform single regulation,” Mr. Kramer said.
If he had started Ariel Re in New York or California, “it would take me years to be licensed,” he said.
Mr. Kramer noted that he raised $1 billion in 12 weeks to get up and running in Bermuda late last year.
Bermuda has become the place “where you get ease of entry, cooperation between regulatory authorities, and intelligent regulation,” he said.
The Bermuda Monetary Authority, said Mr. Kramer, has both audit and actuarial certification requirements and it maintains relationships with NAIC and the FSA in the U.K., as well as other regulators throughout the world.
“They talk to the industry. They want to find out how we do things,” he added.
Mr. Kramer also noted that the members of the Bermuda insurance community “have a vested stake in the solidity” of the Bermuda insurance market.
“We can’t afford to have criminals or crooks or miscreants come into our market and mess it up, when we have tens of billions of dollars of capital committed” to the industry, he said, noting that the market’s solvency and reputation are at stake.