Following is from the “risk factors” in ACE’s recent annual report. It is remarkable that a company with a market capitalisation of $19 billion ranks unpredictable Bermuda Government policies as one of the largest risks affecting its business.
Many of Bermuda’s international companies now have similar warnings about the island’s immigration restrictions in their SEC filings - and the tone of those warnings has hardened following the Bermuda Government’s sabre rattling.
Many of our senior executives working in Bermuda, including our Chairman, President and Chief Executive Officer, our Chief Financial Officer, our Chief Accounting Officer, our Chief Actuary, and our General Counsel, are not Bermudian. Under Bermuda law, non-Bermudians (other than spouses of Bermudians and holders of permanent resident’s certificates) may not engage in any gainful occupation in Bermuda without an appropriate governmental work permit. Our success may depend in part on the continued services of key employees in Bermuda. A work permit may be granted or renewed upon showing that, after proper public advertisement, no Bermudian (or spouse of a Bermudian or holder of a permanent resident’s certificate) is available who meets the minimum standards reasonably required by the employer. The Bermuda government’s policy places a six-year term limit on individuals with work permits, subject to certain exemptions for key employees. A work permit may be issued with an expiry date that is one to five years later, and no assurances can be given that any work permit will be issued or, if issued, renewed upon the expiration of the relevant term. It is possible that Bermuda could change its laws or policies in a way that would make it more difficult for non-Bermudians to obtain work permits.
Bermuda is another world but in the real world of our international companies, there are consequences. The “Bermuda Risk” above is one of the problems lessened by ACE’s new HQ in Switzerland.
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1 Caliban // Mar 26, 2008 at 9:04 am
Beef up BMA says Greenberg
By Roger Crombie
March 7, 2007 RG
Bermuda’s regulation of its insurance industry needs to be upgraded to world-class to maintain the Island’s place as a leading jurisdiction, says Ace Ltd. chief executive officer Evan Greenberg.
While financial regulatory body the Bermuda Monetary Authority (BMA) had made progress, time was “of the essence”, he said, and further improvements — including an increase in the number and professional level of its staff — needed to happen faster.
“Bermuda’s insurance and financial services regulatory environment, while ahead of many other important jurisdictions in terms of sophistication, standards and enforcement, is not yet seen as a global leader — a model regulatory environment at the head of the pack — and this is where it needs to be,” Mr. Greenberg said.
“Bermuda’s regulatory environment needs to continue evolving rapidly and become a leader in adopting a world-class set of progressive standards to match its global market influence.”
Speaking on Monday at an Institutional Investor Conference for visiting risk managers, entitled Bermuda Risk Management Roundtable, Mr. Greenberg spelled out how a perception of light regulation could damage the Island’s future.
Investors, he said, “are concerned about Bermuda’s legitimacy and permanence. Investors don’t like unpredictable risk, and some perceive risk to the future prosperity of the Island.
“They fear the capricious and potentially damaging actions of politicians who perceive Bermuda as a destination where companies are allowed to game the tax system or where regulation is light. That’s why in part companies such as mine trade with a so-called Bermuda discount — a reduction, I believe, that is undeserved.
“A strong and enlightened regulatory environment — frankly, one at the leading edge, one that sets an example of excellence globally — will help validate the legitimacy of Bermuda and ensure its prosperity for many years to come.”
Mr. Greenberg, who is also the president and chairman elect of the Island’s biggest company, said regulators around the world viewed Bermuda as being somewhere “in the middle of the pack” in terms of having a reasonable standard of regulation. But he said with the rapid growth of the Island as a major insurance centre, with $50-$100 billion of capital at risk, “that’s not good enough”.
Times have changed, Mr. Greenberg said, “and some don’t see that. They are trying to hold onto the past, or believe somehow that all this does not apply to them. They do that, not only at their own peril, but at the peril of what is, and I hope always will be, a great place to do business called Bermuda. And we cannot let that happen.”
The insurance leader praised regulators for decreasing the amount of private-sector involvement in the regulatory decision-making process.
“Notable examples include the dismantling of the (Insurance) Admissions Committee and the (Insurance) Advisory Committee — two bodies that, in my judgement, overly involved the private sector in regulatory matters,” Mr. Greenberg said.
Changes needed at the BMA, he said, included:
[bul] The regulator should be regulating more rigorously for solvency, governance and proper risk management of insurance companies. “The regulator needs to become deeper and more efficient in these processes,” Mr. Greenberg said.
[bul] Bermuda should complete the separation of the private sector from its involvement as it currently stands in the regulatory process.
[bul] The BMA should adopt the minimum framework of standards that some of the major regulators around the world are beginning to adopt or have adopted. “These standards are as reflected specifically in Solvency 2 in Europe and in the regulatory environment of the FSA in the UK,” Mr. Greenberg said. “Bermuda is working on this and is already ahead of many other jurisdictions, including most states in the US, but it’s not done”.
[bul] The BMA needs to quickly appoint an experienced, world-class regulator to the CEO position who will bring an added image of credibility to Bermuda’s financial regulatory institution. Cheryl Lister, who has been the CEO, is to retire in May.
[bul] The BMA needs to continue to increase the number and professional level of its staff. “That means high-quality, experienced professionals, such as competent actuaries and accountants,” Mr. Greenberg said. “All the insurance companies on the Island should be prepared to continue to step up and contribute financially to these moves, and pay what is necessary. Those who do not choose to do so should take their business elsewhere.” The BMA had 37 full-time staff last year and expected to have 53 this year, and in the medium term expected the number to increase to 80, he said.
[bul] Bermuda needs to complete the risk-based capital project and integrate this into a solvency regulation regime. “This project has gone on for way too long,” Mr. Greenberg said. Risk-based regulation acknowledges that a $1 billion insurer should be regulated differently from a small captive with a single parent.
While consultation with the private sector is always a good thing, Mr. Greenberg said, “striving to achieve consensus with the industry, which generally cannot agree among each other on anything, can impede progress and prove inefficient.”
Mr. Greenberg said he was “speaking out of concern and support. I do so because I care about preserving what Bermuda has created here, and I want to see it flourish for a long time to come. Mine is a call for greater and swifter action,” he said, adding: “Time is of the essence.”
Some Bermudians lack a global perspective, Mr. Greenberg said. “There are many constituencies on the Island that conduct most of their business or professional lives only on the Island.
“As a consequence, in my judgement, many of them lack a perspective on how Bermuda fits in with the rest of the world. That’s OK. But they may not hold the Island back from what needs to be done to maintain the position that Bermuda serves in the global marketplace. After all, this is the major source of Bermuda’s prosperity. Out of context, therefore, they will hurt Bermuda.”
Time is short, Mr. Greenberg said. “Global companies such as Ace who are based here and doing business in all of the important jurisdictions around the world are feeling the pressure to have a home regulator at the leading edge. And the long-term competitiveness of Bermuda as an insurance market could be threatened if it is not considered a leader in modern regulation with the improved image of legitimacy this brings.”