For many years the leader in creating and implementing business and regulatory models that have become the standard for other jurisdictions to follow, Bermuda is today home to a thriving and dynamic offshore financial services industry.
An archipelago of nearly 140 islands in the North Atlantic, Bermuda is within two hours’ flying time from most US East Coast hubs and also within easy reach of Canada, and it also enjoys daily air service to the UK and Europe.
Its strategic location between Europe and North America offers proximity to the world’s largest capital markets and global business centres, a key ingredient in Bermuda’s success in carving out a prominent and highly regarded niche in the global financial services industry. It also benefits from the sound economic and financial management of the territory, reflected in the recent affirmation by Fitch of its AA+ sovereign rating, the same as Australia’s.
The territory’s pragmatic commercial approach, reflected in close collaboration between the private and public sectors, has resulted in an operational, technical and regulatory infrastructure focused on clients’ needs. This model ensures that Bermuda’s policies remain in line with or ahead of market developments, and provides a high level of regulatory oversight while continuing to foster the entrepreneurial spirit that drives innovation.
This approach has been evident in the spirit of co-operation with which Bermuda has responded to the demands of the G20 countries for enhanced global standards of transparency and exchange of information in tax matters. The jurisdiction was the first offshore centre to be moved to the white list drawn up by the Organization for Economic Co-operation and Development, reflecting recognition of its efforts to implement the accepted international standards.
In September Bermuda was elected a vice chair of the steering group of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, the only non-member jurisdiction to receive this designation. Meanwhile, its efforts to pursue further tax information exchange agreements continues above and beyond the white list threshold of 12; Bermuda has now signed 15 Tieas and has concluded negotiations for a further agreement, with Spain, that is expected to be signed shortly.
The benefits of its pragmatic approach are visible in the success of Bermuda’s transformation from what was purely a tourist destination in the 1950s to one of the world’s leading insurance hubs. At the end of 2006, more than 1,400 insurance and reinsurance companies were registered with the financial industry regulator, the Bermuda Monetary Authority (BMA). Collectively the sector had more than USD100bn in assets and capital and a surplus exceeding USD110bn at the end of 2005.
Historically, Bermuda was seen principally as a captive insurance jurisdiction, but over the past 15 years it has evolved into a global leader in property catastrophe reinsurance coverage, with 40 per cent of the US and European markets. Today Bermuda reinsurers account for 13 of the top 40 firms in the Standard and Poor’s reinsurer rankings and 15 of the top 35 ranked by AM Best.
Bermuda’s has built its success in a global marketplace on the support of the capital markets, offering a centre of excellence with a diverse and talented underwriting pool and an effective and appropriate regulatory regime. The jurisdiction’s financial community now comprises giant specialist insurers including Ace and XL Capital alongside such household names as Citigroup, Bank of New York Mellon, Nomura Securities and HSBC.
Bermuda’s strength as a leader in the offshore financial services business owes much to its longevity. As an early pioneer in the sector, the jurisdiction has developed a commercially sensible level of regulation based upon years of experience and created sophisticated products tailored to the needs of a selective client base.
Its experience has produced a deep and knowledgeable infrastructure of service providers encompassing global fund administrators, attorneys, banks, auditors and the Bermuda Stock Exchange (BSX).
A recent example of its innovative approach is the Launch ‘n’ List service offered to the global hedge fund industry through collaboration between the Bermuda International Business Association (BIBA), the BMA and the exchange. It was developed as a result of industry feedback that indicated growing frustration among practitioners with the delays inherent in creating, domiciling and listing a structure, and is designed to reduce or eliminate duplicated procedures, in turn reducing the length of time to market.
The BSX has carved a niche in the global stock market industry since its establishment in 1971, with over 650 listed securities and a combined market capitalisation of about USD200bn. Offering a complete stock exchange solution, the BSX trades and settles stock and cash transactions daily through its electronic trading, settlement and depository systems.
The development of the BSX has assisted the growth of Bermuda’s capital market and provided opportunities for international clients. The exchange’s commercially-minded supervisory approach dovetails with that of the jurisdiction, and is based upon internationally accepted regulatory and operational standards.
It aims to strike the right balance between providing issuers with access to the market at the earliest opportunity, and giving investors safeguards and timely information that enable them to make informed decisions on the value, risk and merit of listed securities.
The BSX’s approach has been embraced by the global fund industry, with more than 350 listed investment fund structures. In addition, the exchange has recently seen growing interest in the listing of fixed-income instruments and derivative warrants, with more than 100 such structures being listed in 2007 alone.
International regulatory recognition and long experience in the global market have made the BSX the location of choice in the offshore world for entities seeking a superior level of support and distinction from their listing. More than half of the funds listed on the exchange originate from other jurisdictions.
Bermuda’s stakeholders have always embraced change in order to benefit from potential opportunities in a fast-evolving world, and the jurisdiction will continue to encourage innovation in its core financial services industries in the future.
The BSX sees enormous potential stemming from its combination of a unique regulatory infrastructure, strategic geographical location and internationally-recognised electronic platform, positioning the exchange perfectly to exploit fast-changing and expanding global capital market opportunities.
By Greg Wojciechowski, President and Chief Executive Officer, BSX