Will Bermuda Give Expats The Bum's Rush?

When Bermuda Premier Ewart Brown released a video on YouTube on Nov. 2, he tried to convince his fellow citizens that the island's future is bright.

"Bermuda's future is boundless," he said. "Our economic future is strong; it's the envy of much of the world." However, during the same message, he also addressed growing political tensions and disclosed that Parliament was being dissolved in advance of a mid-December general election.

The message came in the wake of a political corruption scandal that three days earlier had culminated in a ruling by the Privy Court in London--the island's highest court of appeal--allowing the media to report on some damaging police documents related to the controversy.

Coincidentally, it also followed a string of media reports a month earlier suggesting that insurance and reinsurance executives--who are supposedly dissatisfied with the political climate in general and, more particularly, frustrated with work permit time limits and delays--might consider packing up and leaving Bermuda.

Articles in Bermuda's Royal Gazette as well as the United Kingdom's Global Reinsurance and Reinsurance magazine reported off-the-record conversations with Bermuda executives that took place at the Rendezvous de Septembre in Monte Carlo, suggesting they were readying their companies for what some of these publications called an "Island Flight" scenario.

In the United States, a few days after the Monte Carlo Rendezvous, Mr. Brown addressed attendees of an annual congressional dinner with the Caribbean community hosted by the Inter-American Economic Council, proposing a policy that would tie three-year work permits for some types of workers, with requirements to the permit holders to train local workers to do their jobs when the three years are done.

While such rules could make life more difficult for Bermuda insurers, two experts who spoke to National Underwriter recently saw the "flight" scenario as unlikely.

"We have not seen any suggestion of a wholesale move of headquarters off the island. That would be very much of a surprise and it would generally be a big issue for companies to do that," said Alan Murray, senior credit officer for Moody's Investors Service in New York.

"There certainly has been some political tension on the island, which is just naturally a phenomenon of the local population and how the government is balancing the needs of the local population and the desire to have a very favorable and prosperous international business environment," he said.

"The growth pace of insurance in particular, and financial services overall, is huge, and it's a small island, so it leads to resource issues," he said, adding that the accessibility to the public schools for expatriate workers in Bermuda has been a challenge for several years now.

Marty Becker, CEO of Max Capital, said that "Bermuda today is probably the world's most attractive single domicile in which to have an insurance company when you weigh all factors."

"It remains very robust. The people who work in Bermuda are really pleased to be working in this market, and it continues to be a market that attracts creative talent," he said.

"I think that most of the stories that cast the Bermuda market negatively are typically [sourced from] players in other markets," he continued. "You sort of have to question their motivations."

Mr. Murray said Moody's has seen that some Bermuda insurers--"partly for cost and maybe partly for work-permit related [issues], have sent some of their executives back to offices in Europe or the [United] States. So they're lightening up the staff count relatively in Bermuda."

He said he's also seen some companies outsourcing or electronically sending front-end catastrophe analytics on submissions to India or other places so they're not top-heavy back in Bermuda.

Will the next wave of startups come to Bermuda?

Mr. Murray responded that he wasn't even sure additional companies would be needed to respond to the next loss crisis if one arises. The scope of opportunity was limited for the "Class of 2005," he said, noting that very few companies were actually taken out of the market--"and most companies already in business wanted to fortify their capital and get back in."

Between sidecars, catastrophe bonds and opportunistic companies that raise capital when they need it, there may not be as much demand for startups in the future, he said.