The flood of capital that has moved into Bermuda in recent years is not responsible for creating or sustaining a soft market, a lobbyist for Bermuda insurers and reinsurers declared at a recent meeting here.
Bradley Kading, president and executive director of the Association of Bermuda Insurers and Reinsurers, aired that view in response to a question posed to him during a joint luncheon of the Association of Professional Insurance Women and the Insurance Brokers Association of the State of New York.
"If you look at Bermuda companies, you'll see record amounts of stock buybacks authorized during the current calendar year," he said, adding that in other words, the money they're making from profitable insurance results "is going back to shareholders. It's not contributing to the downward spiral [in commercial insurance pricing]."
Mr. Kading's view received support from a rating agency report published by New York-based Standard & Poor's on the same day, with S&P noting that a group of 23 Bermuda companies bought back $2.7 billion of their shares–roughly 3.7 percent of shareholder's equity as of Sept. 30.
S&P cited "prudent capital management" strategies as one factor supporting its view that ratings will remain stable for the next six months at least–even as the market softens. S&P also highlighted enhanced enterprise risk management processes and disciplined underwriting as factors backing up its "cautiously optimistic" view.
The report–"Will The Good Times Last for Bermudian Re/Insurers?"–said the group's shareholders' equity had jumped to $72 billion as of Sept. 30, on the heels of record profits, and that the companies still have about $3.4 billion (4.7 percent of shareholder's equity) under existing share-repurchase authorizations.
Back at APIW, Mr. Kading–whose organization represents 23 Bermuda companies writing $56 billion in gross written premium (although not exactly the same 23 tracked by S&P)–reviewed the benefits of a Bermuda domicile. He cited, for one, an "entrepreneurial spirit" that led to the development of a captive market and several classes of reinsurers.
More of the world's top reinsurers–15 of the top 35–are based in Bermuda than in Europe or the United States, he noted.
In addition, with astute investors and underwriters from all over the world coming together, Bermuda is "a center of innovation for the transfer of insurance risk directly to the capital markets," he said, pointing to the development of sidecars in recent years.
Bermuda's small size is both a plus and a minus, he suggested, noting that a benefit of smallness that is often overlooked is that it helps preserve a reputation for integrity.
"There are no secrets in Bermuda. The actuaries, underwriters, bankers, accountants, lawyers, claims people, government officials all know each other. If you're trying to keep a secret to do a dirty deed, it's basically impossible," he said.
On the other hand, he presented a list of issues–several related to size–that threaten "sustainability of the Bermuda edge," including infrastructure and talent constraints, education issues, housing problems, transportation problems, and competition from domiciles and jurisdictions trying to lure companies away.
Focusing on education, Mr. Kading and two Bermuda executives described cooperative efforts between insurers and the government aimed at educating Bermuda citizens about insurance.
The two executives–Allison Towlson, senior vice president and regional executive for ACE Bermuda Insurance Ltd., and Sherron Williams, senior vice president of professional lines for XL Insurance Ltd.–both Bermudians, described their career paths and shared details of various scholarship, internship and mentoring programs in place at their companies.
Ms. Williams said XL has a scholarship program and provides funding for the Bermuda Insurance Institute. It also offers internship opportunities for Bermudians and a coveted in-house development program allowing selected young employees to work together on a specific XL strategic initiative and to present conclusions and recommendations to senior management.
Ms. Towlson, a graduate of BII, explained that the Bermuda Institute, set up in 1970, is an affiliate of the Chartered Insurance Institute in the United Kingdom. "We knew then that we needed to train our talent up," she said, noting that at BII, it's possible to get CPCU and ARM designations without leaving the island.
Like Ms. Williams, Ms. Towlson detailed an internship program in place at ACE–a collaboration with HSBC bank and the accounting firm Deloitte–and ACE's support of the Bermuda Foundation for Insurance Studies, a foundation with scholarship and intern programs for university students.
"Why are we doing this?" asked XL's Ms. Williams. "There are a number of reasons, but one is to be a good corporate Bermuda citizen," she said, using a phrase the local government employs to identify companies with initiatives to attract, recruit and train Bermudians. Such companies are rewarded by the government with smooth immigration processes for expatriate workers and related incentives, she said.
Quoting from the government Web site, she said, "This government has worked hard to strike the right balance between the understandable desire of business to operate with a minimum of regulatory control and the legitimate and proper aspirations of Bermudians to participate fully in the economy of their island home."
The passage she read is actually the introductory paragraph of a statement regarding work permit regulations which goes on to state that the maximum permit terms are six years, but that exemptions are possible for good corporate citizens.
XL, which was awarded good corporate citizenship status in 2006, has over 300 employees in Bermuda currently, Ms. Williams noted, adding that 61 percent are Bermudian and 120 of those are in professional underwriter and manager jobs.
The percentage mirrors a figure provided by Mr. Kading, who said ABIR members employ 1,700 workers in Bermuda and that 63 percent are Bermudian. ABIR members employ 17,000 people worldwide, he added.
Although there have been recent media reports in Bermuda's Royal Gazette and several U.K. reinsurance publications suggesting that work permit time limits and delays have frustrated unnamed insurance executives so much that they may pack up and leave the island, Mr. Kading told NU that ABIR members are not among them.
"The government is committed to resolving work permit issues in a timely fashion," he said, adding that companies with certain talent requirements are given exemptions to the six-year limits.
He confirmed that the government recently floated an idea to put three-year terms on permits and tie them to three-year training programs for Bermudians that would replace expatriate workers when permits expire.
"I think the way to think about that is that it's part of job training–it's part of everybody's interest in having apprenticeship[s] and in building the local talent pool," he said. "So I'm not sure that we'll ever see it in legislation. It's really just to crystallize the way we're all trying to develop local talent."
Despite efforts to build the local talent pool, a captive manager in the APIW audience said his firm was struggling with employment issues exacerbated by Bermuda competitors.
"I'm not surprised," Ms. Williams said, noting that even ACE and XL have found it challenging to retain Bermudians. "There's a finite pool of highly educated Bermudians, and it's easier to bring in someone from a different company that's already on the island," she noted.
The panelists also addressed questions about the potential impact of an upcoming election in Bermuda and efforts by U.S. commercial insurers to get Congress to remove tax advantages enjoyed by Bermuda competitors.
Ms. Towlson, who is a member of Bermuda's Insurance Development Council, a marketing group, said that her IDC role has allowed her to work with both political parties. "They both wholeheartedly embrace the insurance industry and support it."
Bermuda-related art and caption:
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.