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2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
2012 Bermuda Economic-Impact-Study
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2012 Bermuda Economic-Impact-Study

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2012 Bermuda Economic-Impact-Study
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  • 1. Bermuda in the World Economy:Economic Relations with Asia, Europe and the United States - 2012 Prepared Exclusively for Business Bermuda Hamilton Bermuda TRANSNATIONAL ANALYTICS LLC Washington, D.C. September 2012
  • 2. Business Bermuda September 2012BERMUDA IN THE WORLD ECONOMY 2012SECTIONS:I. Executive Summary ........................................................................................................................... 4II. Overview of Bermuda’s Economy .................................................................................................... 7III. Bermuda’s Economic Profile in the Global Economy– 2010 .......................................................... 9IV. Bermuda’s and the United States .................................................................................................... 11V. Bermuda‘s Growing Economic Profile with Asia, Europe, and Global Holding Company Centers ............................................................................................................................. 29 - PR China, Hong Kong SAR, Singapore ........................................................................................ 29 - European Holding Company Centers ......................................................................................... 32 - Western Europe and Bermuda ...................................................................................................... 34 - A Final Word on India.................................................................................................................... 37APPENDIX:A: Methodologies and Notes .................................................................................................................. 38B: References and Source ........................................................................................................................ 41TABLES:Table1: Bermuda’s Economic Relations with Key Countries: 2010 ............................................... 10Table 2: Country Ranking of Leading U.S. Trade Partners by Category of U.S. Trade in Private Services: 2011 ........................................................................................................................... 13Table 3: Country Ranking of Leading Foreign Holders of U.S. Securities: 2011…….…………..14Table 4: Levels of Foreign Holdings of U.S. Securities: World and Bermuda: 2004-2011 ........... 15Table 5: U.S. and Bermuda Goods Exports, Imports and Balance of Trade: 2011 ......................... 16Table 6: U.S. Services Exports to and Imports from Bermuda: 1997-2011..................................... 18Table 7: Foreign Direct Investment Positions with the United States by Country: 2000-2011 .... 20Transnational Analytics LLC 2 Washington DC
  • 3. Business Bermuda September 2012Table 8: Sales by United States and Bermudian Affiliates of Multinationals Through their Affiliates by Country: 1999-2009 .......................................................................................... 21Table 9: Employment of Majority-Owned U.S. Affiliates, by Country of Ultimate Beneficial Owner: 1996-2009.................................................................................................................... 22Table 10: Country Ranking of Leading Foreign Holders of U.S. Securities: 2010 ........................... 26Table 11: PR China (Mainland) Economic Relations with Bermuda................................................. 30Table 12: Singapore Economic Relations with Bermuda .................................................................... 31Table 13: Hong Kong (SAR) Economic Relations with Bermuda ...................................................... 32Table 14: Netherlands Economic Relations with Bermuda ................................................................ 33Table 15: Ireland Economic Relations with Bermuda ......................................................................... 34Table 16: Switzerland Economic Relations with Bermuda ................................................................. 35Table 17: United Kingdom Economic Relations with Bermuda ........................................................ 36Table 18: German Economic Relations with Bermuda ........................................................................ 36Table 19: France Economic Relations with Bermuda ......................................................................... 37Transnational Analytics LLC 3 Washington DC
  • 4. Business Bermuda September 2012I. Executive SummaryThis study looks at Bermuda’s economic role in the world economy. The study findsthat Bermuda stands out from other countries in three key ways. First, Bermuda has alarge and leading role in the U.S. economy. Bermuda continues to be a leadinginternational trade and investment partners with the United States - year in and yearout. Frankly, parts of the US economy would not function without Bermudainternational business. Bermuda’s economic role is to provide for the United Statesworker, consumer and entrepreneur what U.S. private and public institutions do not orcannot provide. For example, Bermuda manages almost $1 trillion in foreign directinvestment with the world (one third of that directly for the United States. That isindicative of the importance that Bermuda provides as a gateway between the worldeconomy and the United States). Likely most of that investment would not be targetedfor the United States without the advantages and intermediation of Bermuda.More than increasing the amount of foreign investment supporting US jobs, Bermudahas a large trade presence in the United States. By the end of 2011, two-way trade inservices between Bermuda and the United States grew to more than $80 billion. In fact,as many offshore financial centers suffered setbacks vis-a-vis the United States between2008 and 2010, Bermuda became more prominent in the United States relative to otherforeign trading partners. Among other developments by 2010, Bermuda became theleading supplier of reinsurance to the United States and the leading export market forthe U.S. primary insurance sector. U.S. exports of R&D and testing services to Bermudacompanies grew by $2 billion during the recession. In 2010, Bermuda was the: The most important export market for insurance services. The 8th largest investor in the United States The most important foreign supplier of insurance and reinsurance to the United States, averaging $30 billion annually in payments or as much as $35 billion annually in recovered losses. 9th largest U.S. exports market for banking and investment funds. 8th largest U.S. exports market for shipping services. 11th largest US export market for business services. 15th largest market for all U.S. services exports, excluding royalties and service fees. 10th largest portfolio capital investor. 4th largest investor in U.S. government bonds.Transnational Analytics LLC 4 Washington DC
  • 5. Business Bermuda September 2012A responsive regulatory environment for wholesale corporate investment and asophisticated financial and business infrastructure built on decades of experience andtrust puts Bermuda up with London and Zurich as a business center for US privateequity and entrepreneurs. Today, the size and scope of Bermuda’s economy goesbeyond the concept of financial center or offshore jurisdiction. For example, most ofBermuda’s investment in the United States is in productive manufacturing and servicesenterprises rather than simply chasing tax free returns for bank accounts. Bermuda’sinvestment in the United States produces 300,000 jobs.Second, in spite of, or because of, the difficult and challenging economic times,Bermuda’s economic role in the world economy has expanded. Bermuda’s chiefeconomic partner remains the United States but Bermuda has expanded its role fromsimply an investor and job creator in the United States to a transnational platformsupporting competitiveness for both Asia and the United States – strengthening USonshore business by bringing Asian and US investors together. Bermuda’s economicrelations with the European Union are large and expanding, driven by itscompetitiveness providing services that support European business but also by itsimportant role as a holding company center for US corporations doing business inEurope. As a result: Two-way trade in services with Europe is more than $25 billion and Bermuda is in the top 20 countries importing and exporting services with Europe (EU and EFTA). Bermuda holds $20 billion of investment with China and Singapore, a 400% increase since 2004. Bermuda is both the Netherlands and Ireland’s largest investor.Bermuda’s service businesses, including its insurance and reinsurance industry havegrown its business profile from the traditional U.S. market to include Europe and Asia.Altogether for the ten countries studied in this report, Bermuda is responsible foranother 300,000 jobs created in the world economy in 2010 beyond those already createdin the United States for a global employment profile of 600,000 international jobs. Thatis quite a feat during the economic crisis.Finally, Bermuda has stepped up to global market demand and become a holdingcompany center in the world economy that is transforming international business asnew players enter the world economy from Asia and the Netherlands to private equityinvestors in the United States. A new version of U.S. operating companies domicile inTransnational Analytics LLC 5 Washington DC
  • 6. Business Bermuda September 2012Bermuda and maintain a strong relationship with Asia reflecting the general trend inthe global economy. U.S. investors from private equity investors to manufacturingcorporations form joint ventures in Bermuda that takes advantage of supportiveregulatory environment relative to Asian countries and merges U.S. technology withAsian manufacturing to make a competitive global company based in Bermuda butwith important economic profiles in the United States market and the Asian economy.Companies like Freescale, Marvell, Contel, AOSL, and Chipmos, to name a few“fabless” chip companies, were formerly U.S. companies and redomiciled to Bermudasince 2006. Today, these Bermuda semiconductor manufacturers employ 30,000 U.S.workers in manufacturing and sales. Since 2008, these companies created more than $3billion of service-based export business to Bermuda in testing and R&D servicescreating more U.S. jobs. During the 2000s more than 500 Asian companies followed thisnew multinational governance model and domiciled their companies in Bermuda tosupport their U.S.-Asian business model. Bermuda has become an importantcomponent of how global “holding company” multinationals that rely on U.S. jobs aswell as related Asian operations. Bermuda governance and investment environmentcontributes to the competitiveness of U.S. business investment, where a U.S.multinational or an Asian multinational would simply not perform as well.Transnational Analytics LLC 6 Washington DC
  • 7. Business Bermuda September 2012II. Overview of Bermuda’s EconomyThis impact study analyzes the international economic relationship between the UnitedStates and Bermuda, specifically as it pertains to cross-border trade and investmentwith ten key countries in the global economy. The study updates an earlier version thathad focused solely on the relationship of Bermuda and the United States prepared forBusiness Bermuda in the summer of 2011.At that time, that study only had access to statistics that predated the 2008/2009 globalfinancial crisis and related economic recession. Because the economic crisis particularlyaffected financial sectors like investment funds and banking and because the ongoingeconomic crisis centered on the United States, Bermuda and its international businesscommunity could have been greatly affected, particularly as to its competitive positionas a financial center. This impact study includes data into 2010 and 2011 and thereforestrives to analyze Bermuda’s response to the crisis in the rest of the world as well as theUnited States as a result of the economic crisis. It finds the Bermuda as a strongeconomic partner with the United States but also expanding its role in trade andinvestment with western European economies, large holding company centers inEurope like Ireland and the Netherlands, and Asia.Before delving into the specifics of the Bermuda-U.S. relationship, a broad overview ofBermuda’s economy, along with its legal and regulatory framework, is useful.Economy. The Bermuda economy has been adversely affected by the global economiccrisis and a full economic recovery is not foreseen until late in 2012 and 2013 as the USeconomy works itself out. For 2012, Bermuda’s national gross domestic product (GDP)likely remains at a level of $5.5 billion.Notwithstanding this difficult economic experience for the domestic Bermuda economy,Bermuda international business has pivoted from its sole reliance on the United Statesand more and more service sector business is being conducted with continental Europeand Asian countries like Singapore. Bermuda’s proximity to the United States is a keyfactor. Much Bermuda business is tied to the long economic relationship with the USeconomy its regulators and the private business community. US investors arecomfortable with the regulatory and investment environment. In the last four years, thechanges in the world economy have also expanded Bermuda’s profile. Bermudabusiness was forced to pivot and rely less on the United States and traditional marketslike the UK and Western Europe. These markets are still important but new actors likeTransnational Analytics LLC 7 Washington DC
  • 8. Business Bermuda September 2012private equity investors that now dominate developed country investments and Asiahave turned to Bermuda as an economy that provides strict regulation of investmentbut is also responsive to wholesale investors and their special economic needs.The quality and reliability of Bermuda’s regulatory structure, coupled with itsproximity to the United States and common language, makes Bermuda a valuableinternational partner in the world economy. Furthermore, Bermuda’s commercial lawenvironment reflects the country’s close relationships with the U.K. and the UnitedStates, and thus offers familiarity and predictability to the international businesscommunity. It is likely that U.S. and Asian investors particularly, Taiwan, Hong Kong,China and Singapore have found the security of a Bermuda domiciled holdingcompany a useful way to organize a transnational investment between Asia and theUnited States.Bermuda’s long interdependence with the United States and the United Kingdom givesit both economic and political stability that attracts business interests seeking aninternational business platform allowing easy mobility of portfolio and capitalinvestment. Bermuda’s financial regulatory bodies and the Bermudian governmentmoved quickly in response the 2007 and 2008 global financial crisis to reassure foreigninvestors and their governments that regulatory standards were stable and transparent.Bermuda has entered into a set of treaties with the United States that offer protection toinvestors and intermediaries in international financial services. For instance, Bermudahas a Mutual Legal Assistance Treaty (MLAT) with the U.S. focused on the preventionof tax fraud and the evasion of taxes. MLAT allows U.S. and Bermuda authorities torequest and obtain assistance from each other in criminal investigations andprosecutions and related proceedings.Bermuda has formalized signed Tax Information Exchange Agreements (TIEA) withnineteen countries, including the United States, United Kingdom, Germany FranceJapan and India. Moreover, Bermuda has also concluded TIEA negotiations withCanada and others. As such, Bermuda complies with the standards of the G20 TaxInitiative and OECD standards. It recently signed a Double Taxation Agreement withBahrain. The U.S. agreement was signed in 1988. The TIEA allows the governments toobtain requested information from banks and trustees, regardless of whether any crimehas been committed, and without the knowledge of the subject of an investigation orany requirement for a court order.Transnational Analytics LLC 8 Washington DC
  • 9. Business Bermuda September 2012Bermuda has built an important, and sometimes preeminent, relationship with theUnited States in key areas of the U.S. economy. The following chapters describeBermuda’s contribution and impact on key sectors in the U.S. economy.III. Bermuda’s Economic Profile in the Global Economy - 2010.In the pages that follow, this study describes the economic significance of Bermuda inthe world economy by examining its key trading partners and international economicrelations. Relying on official data sources of governments and international economicorganizations, the study describes the economic profile that Bermuda holds with itsmajor trading partners and in the world economy. The study looks in detail in pagesthat follow for the United States, United Kingdom, Germany, France, Switzerland,Netherlands, Ireland, Singapore, Hong Kong SAR and PR China from 2004 to 2010 (thelatest year for which economic data are available for all of these countries together.)Overall the study finds that while the United States is Bermuda’s most importanttrading partner, Bermuda is no longer solely dependent on the United States market forits economic success. Bermuda’s economic profile creates hundreds of thousands ofjobs for the world economy. The study examines the remarkable globalization ofBermuda’s economy reaching beyond Europe as a region and the finance sector intoAsia. It showcases the way that Bermuda supports the competitiveness of its economicpartners. The study also looked at India, but found scant evidence to date that Indiaand Bermuda have established a significant economic relationship.The table below summarizes the economic situation for 2010 described by three majorjob creating economic activities – trade in goods, trade in services and the cumulativedirect investment positions these countries maintain with Bermuda. This table showsthe economic significance of Bermuda from the viewpoint of its trading partners. Forexample, the data in Table 1 show U.S goods exports to Bermuda (US$ 0.7 billion),Dutch services imports from Bermuda (US$ 11.7 billion) and PR China stock of directinvestment in Bermuda (US$ 0.4 billion).Transnational Analytics LLC 9 Washington DC
  • 10. Business Bermuda September 2012 Table 1: Overview of Bermuda’s Economic Relations with Key Partners. 2010 (Billions of U.S. Dollars) Country Exports Imports Export of Import of FDI FDI to from Services to Services Position Position Bermuda Bermuda Bermuda from into from Bermuda Bermuda Bermuda U.S. 0.7 0.2 11.0 32.0 264.0 55.0 UK 0.03 0.01 0.9 1.6 27.2 6.0 Ireland 0 0 1.3 4.1 73.8 37.4 Netherlands 0 0 0.5 11.7 131.0 191.7 Germany 1.4 0.1 0.5 0.6 1.7 4.6 Singapore NS 0.2 0.2 0.2 0.1 15.4 China 0.4 NS NA NA 0.4 7.1 (Mainland) France 0.3 0,1 0.2 0.1 9.2 6.3 Hong Kong NS NS 1.4 0.4 0.03 0.08 Switzerland NS NS 5.1 0.9 97.6 10.6 Table Total 2.8 0.6 21.1 51.6 605.0 334.2 Employees 120,000 -- 142,000 -- -- 350,000 Abroad Created by Trade and Investment with BermudaNote: NS – Not Significant; NA – Not Available.. These are not total Bermuda imports or exports but the tradewith the listed countries.Source: U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current Business, October 2011.;PRC Ministry of Commerce, 2010 Statistical Bulletin; Hong Kong Census and Statistics Department, SelectedReports;; Department of Statistics Singapore, Selected Reports; Reserve Bank of India, Balance of Paymentsreports; IMF Coordinated Direct Investment Surveys 2009 and 2010.: OECD, Stat Extracts, EBOPS 2010 databaseon Trade in Services.Bermuda is the economic centerpiece of almost $1 trillion in foreign direct investmentthat has been built up in the ten national economies through companies domiciled inBermuda. Some of this is in the Bermuda finance and insurance sector, some in avariety of business investment models supporting the global economy. Moreover, theBermuda economy created 612,000 jobs in the global economy through its role as aTransnational Analytics LLC 10 Washington DC
  • 11. Business Bermuda September 2012finance and insurance center, business services support of foreign investment flowsparticularly with Asia, the United States, and Europe. IV. Bermuda and the United StatesBermuda and the United States have a substantial bilateral economic relationship,amounting to $60 billion in 2008 and increasing to over $80 billion in 2011. The bulk ofthe U.S./Bermuda economic relationship is in the export and import of financial andnon-financial services – including equally both cross-border and services deliveredthrough U.S. subsidiaries of companies headquartered in Bermuda. In 2011, U.S. cross-border service exports to Bermuda amounted to $12.5 billion, and U.S. imports fromBermuda were $32 billion.In terms of goods, Bermuda relies on American exports for a broad range ofmanufactured goods – ranging from food to aircraft – to sustain its economy. In fact,the United States is one of Bermuda’s largest trading partners, exporting $610 million ofmanufactures to the island in 2011. We estimate that Bermuda-U.S. economicrelationship covering trade in goods and services as well as sales of services in theUnited States sustained more than 296,000 U.S. jobs per yearBermuda is an important economic partner for the United States, as the rankings ofcross border trade demonstrates below. In 2011, Bermuda was: The most important foreign supplier of insurance and reinsurance to the United States, averaging $30 billion annually in payments and as much as $35 billion annually in recovered losses. Eighth largest foreign investor in the United States. 9th largest U.S. exports market for banking and investment funds. The largest U.S. exports market for insurance receipts. 8th largest U.S. exports market for shipping services. 11th largest US export market for business services (mostly testing and accounting) 15th largest market for all U.S. services exports, excluding royalties and service fees. 10th or 11th largest portfolio investor in the United States. 4th largest investor in U.S. government bonds and 7th largest holder of US Treasuries.Transnational Analytics LLC 11 Washington DC
  • 12. Business Bermuda September 2012Table 2 illustrates Bermuda’s importance as a trading partner in services with theUnited States and is the basis for the summary rankings noted above. This table showsthat Bermuda stands among the United States’ major export markets including theUnited Kingdom, Canada and Japan.Bermuda’s relative ranking has been growing over time sometimes because certaincountries declined in their significance relative to Bermuda and other times becauseBermuda expanded its economic significance substantially. Overall Bermuda ranks asthe 15th most important export market for the United States in cross border servicestrade in 2010 compared with being 26th most important in 2000. Due to the globalrecession in 2008 and 2009, Bermuda moved up from 4th most important insuranceservices export market to the first export market for the US and just ahead of Canada inthis sector. This is due to the steep decline of US exports to the UK and Japan since2008. The Bermuda market comprised of business related insurance held steady. It isalso noteworthy that Bermuda’s substantial international business and financial sectorsdraws substantial exports of US business and professional services. In 2011, Bermudabecame the 11th most important export market for US business and professional services(including testing, accounting and legal services compared to ranking 18th in 2007.Transnational Analytics LLC 12 Washington DC
  • 13. Business Bermuda September 2012 Table 2Country Ranking of Leading U.S. Trade Partners by Category of U.S. Trade in Private Services: 2011* (Millions of U.S. Dollars) Country Total Insurance Ocean Finance Business& U.S.(X) (X) Transport (X) Professional (M)** Services (X) Global U.S. 530,274 14,605 27,749 66,387 126,296 Trade UK 48,535 1562 911 9348 13313 Canada 50,521 2617 302 4702 8682 Japan 44,750 1407 4049 3059 10384 Germany 24,118 301 2186 2025 6380 Mexico 24,110 548 7 1188 3847 Ireland 24,840 437 20 1074 8689 France 15,843 235 826 2094 3916 China 21,135 67 1568 2024 4198 Netherlands 12,874 60 382 1494 5093 Switzerland 20,313 491 1586 1209 7636 Bermuda 12,510 3115 1087 1928 3713Source: U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current Business, October 2011Notes: Switzerland, Norway, Korea and Taiwan are also leading suppliers of ocean transport shippingservices. *U.S. Receipts, except Ocean Transport Shipping, which are U.S. Payments.**(X)=Exports and(M) =ImportsTable 3 summarizes foreign investment in U.S financial instruments by country. As thetable illustrates, Japan and China are leading investors in U.S. long term (LT) and shortterm (ST) securities, and in 2011 held large amounts of U.S. government instrumentslike Treasury bonds and other U.S. government agency bonds reflecting their largetrade surpluses with the United States and the need to hold dollar deposits. Theirpositions in government bonds began to increase in 2011 after a long absence during thefinancial crisis. The rest of this list of the leading investors in US securities alsoexpanded their positions with the exception of Bermuda, Hong Kong and Ireland.Where there was an expansion it was not in US government bonds but in corporatesecurities reflecting an interest in US private sector assets with higher yields and riskafter many years. Bermudian entities are major investors in U.S. securities, ranking 11thin global commitment to the United States as an investor in securities. Besides the sizeTransnational Analytics LLC 13 Washington DC
  • 14. Business Bermuda September 2012of Bermuda’s investment position in the United States, it is also significant for theUnited States that Bermuda helps to diversify U.S. security holdings from the BRICsand large trade surplus countries. Table 3 Country Ranking of Leading Foreign Holders of U.S. Securities: 2011 (Billions of U.S. Dollars) Country U.S. LT Treasuries Other U.S.G. Bonds All LT ST Debt & Equity China 1302 245 1721 Japan 818 257 1518 UK 118 12 965 Cayman Islands 47 37 809 Luxembourg 88 19 797 Belgium 85 6 436 Ireland 31 26 291 Canada 35 4 546 Switzerland 106 13 471 Hong Kong 53 116 226 Bermuda 44 41 248Source: U.S. Treasury, Treasury International Capital System, Report on Foreign Portfolio Holdings of U.S.Securities as of June 30 2011. Table A2 August 2012 summarizing U.S. position on June 30, 2011.Overall foreign holdings of U.S. debt and equity financial investments recovered in 2011to $11.6 trillion compared to $10.3 trillion in 2008 and $9.7 trillion in 2009 and non-official offshore holdings increased above the 2007 level. In Table 4 it can be seen thatBermuda’s holdings, however, remained steady across all classes of portfolioinvestment in the United States and overall ranked 11th most important country originof investment overall and 4th most important in holdings of government agency bondsand other government agency instruments. The steady nature of investment in theUnited States from Bermuda even as the rest of the world showed some volatility likelyreflects the conservative nature of Bermuda based insurance and investment companiesin how they manage their investment portfolios. But also, it reflects the long-termrelationship between Bermuda investment funds and large depositors like U.S. pensionfunds that can increase their tax-free yields on investments only by investing in aforeign income tax free country like Bermuda. U.S. pension funds and other legally tax-exempt entities are likely seeking the security of US guaranteed agency bondspurchased from Bermuda and qualifying for tax exemptions on unrelated businessincome (UBI) under the US IRS code.Transnational Analytics LLC 14 Washington DC
  • 15. Business Bermuda September 2012 Table 4 Levels of Total Foreign Holdings of US Securities By Offshore Investment Jurisdiction: 2004-2011 (Billions of U.S. Dollars) Year Bermuda United Cayman Hong Ireland TTL Non- Kingdom Is. Kong Off 2004 180 488 376 69 164 2500 2007 238 921 740 138 342 7000 2008 210 864 632 147 400 7000 2009 199 788 650 222 348 5700 2010 249 798 743 293 356 6300 2011 242 965 809 226 291 7200Source: U.S. Treasury, Treasury International Capital System, August 2012 summarizing U.S. positions betweenJune 30, 2004 and June 30, 2011.Trade in Merchandise Goods. As a small island economy that is not self-sufficient tomeet its manufactured needs, Bermuda depends on exports of merchandise goods fromthe United States. As summarized in Table 5, in 2010, the United States exported about$611 million in manufactured goods to Bermuda and enjoyed an average bilateral tradesurplus of $600 million for the last ten years. The chief U.S. exports are private andbusiness jets made or finished in Little Rock, Arkansas and Wichita, Kansas. U.S.aircraft exports to Bermuda have grown steadily since 2004 and amount to more than$150 million a year. The United States exports close to $45 million worth of computers,telecommunications equipment and consumer electronics to Bermuda annually. Theremaining exports -- ranging from food products to gasoline to apparel -- supply 75% ofBermuda’s total import demand.Transnational Analytics LLC 15 Washington DC
  • 16. Business Bermuda September 2012 Table 5U.S. and Bermuda Exports, Imports and Balance of Trade in Goods: 2011 (Millions of U.S. Dollars)Year U.S. Exports U.S. Imports Balance1992 242.3 6.7 235.61995 298.5 10.4 288.12000 428.5 39.0 389.52005 490.5 87.3 403.22006 637.6 16.1 621.52007 660.0 23.7 636.32008 821.0 140.0 681.02009 807.0 13.0 794.02010 636.5 22.5 614.12011 610.7 59.9 550.7Source: U.S. Department of Commerce, U.S. Census Bureau, Foreign Trade.Cross-Border Trade in Services. Bermuda is a major purchaser of U.S. services exports,particularly in financial sectors like investment and insurance, and also in businessservices like testing, R&D, accountancy and legal advice. In 2011, the United Statesexported almost $12.5 billion in private sector-generated services to Bermuda.According to the U.S. Department of Commerce, Bermuda ranked as a leadingdestination for U.S. services exports beginning in 2002 and has grown rapidly duringthe 2000s.The most important category of U.S. services receipts (or exports) to Bermuda hasbecome professional and business services (including legal, testing, and accountingservices) at almost $4 billion annually. The second most important category of exportsis now insurance and reinsurance services at $3.1 billion. The third most significantcategory of services exports to Bermuda remains financial services that include $1-2billion in receipts for funds management and advisory services, as well as fees andcommissions on transactions in securities.Insurance. Bermuda is the leading supplier of insurance services to the United States inthe world, with substantial U.S. payments (imports) for insurance and reinsurance;including reimbursements for losses. Although Bermuda has developed a capacity toTransnational Analytics LLC 16 Washington DC
  • 17. Business Bermuda September 2012reinsure most lines of insurance, it is dominant in catastrophic-event property andcasualty insurance. Catastrophic-event property and casualty insurance premiumssurged in the United States in recent years because of large losses due to major insuredcatastrophes, starting with Hurricane Andrew in 1992, then the terrorist attacks on theWorld Trade Center in New York in 2001 and major U.S. hurricanes in 2005. As Table 5illustrates, insurance services imports from Bermuda grew 10 fold in the last 10 years.Bermuda has also become a major insurer of American cropland and a leading providerof corporate self-insurance plans (“captive insurance”).Shipping. Another significant contributor to trade in private sector services has beenBermuda’s leading expertise in shipping services. Bermuda is a significant supplier ofocean freight shipping services, mainly related to its large and growing provision ofships to transport crude oil and LNG to ports, terminals and refineries along the U.S.gulf coast. Chevron Tankers, the American Eagle, and Bonny Gas Transport areexamples of large Bermuda petroleum product transportation fleets that have expandedin recent years to meet the unique needs of the United States and the Atlantic Basin,providing very competitive services.Transnational Analytics LLC 17 Washington DC
  • 18. Business Bermuda September 2012 Table 6 U.S. Services Exports to and Imports from Bermuda: 1997-2011 ($ USD Million) Total Travel Shipping Royalties Financial Insurance Professional Private & Fares & License Services Services Business Services Fees ServicesExports to Bermuda1997 869 23 5 79 434 113 542000 1,548 27 85 66 722 298 1012006 6317 36 133 1,469 1,423 887 1,1712007 8,232 95 432 1,715 2,230 1,066 1,2972008 8,672 76 172 1,533 2,136 2,019 2,5892009 9,523 58 182 2,747 1,564 2,520 3,6122010 11,061 60 163 2,832 1,792 2,735 3,3372011 12,510 70 175 2,957 1,928 3,115 3,713Imports from Bermuda1997 2,614 266 717 NA 36 1,576 192000 6,315 274 912 NA 115 4,012 242006 15,686 284 181 159 198 14,814 1102007 17,904 389 1,280 122 230 16,701 3062008 24,740 358 1,122 88 213 21,002 2682009 33,624 238 829 143 256 31,950 1222010 31,740 245 945 16 276 29,940 2292011 32,153 270 1087 59 320 30510 270Direct Employment Ascribed to Services Exports2011 50000 600 NA 0 17000 13500 18500Indirect2011 23550 100 NA 0 8500 5500 9450Total Export Employment due to services exports to Bermuda2011 73550 700 NA 0 25500 19000 28350 Source: Bureau of Economic Analysis – Survey of Current Business (SCB) October 2011. 1/ Cross border service sector trade generally reflects company receipt and payment information gathered by the Bureau in quarterly surveys. For example, trade in insurance services between Bermuda and the United States reflects receipts of insurance and reinsurance companies adjusted for “normal losses” and company investment portfolio changes. This methodology is summarized in U.S. Commerce Department, Bureau of Economic Analysis, SCB “Annual Revisions of International Transactions - July 2003 and July 2004. Reflects new updated insurance data from the 2008 Insurance Benchmark survey by BEA, US Department of Commerce, bureau of Economic Analysis Transnational Analytics LLC 18 Washington DC
  • 19. Business Bermuda September 2012Thanks to its financial services capabilities, access to offshore and New York capitalmarkets, and experience in ship registry and shipping services, Bermuda is becomingan important domicile and manager of oil and LNG tanker fleets with strongconnections to ship fleet owners in Asia and elsewhere in the world. Political stability,a perception of political neutrality and the access and capacity to handle largeinvestments have made Bermuda a substantial player in supporting U.S. energysecurity.Bermuda is the leading country reinsurance provider outside the United States.Comparatively, Bermuda bears larger risks and pays substantially more in losses to theUnited States than any other international provider. In 2009, the only other financialcenters outside the United States that provided insurance services as significant asBermuda were Ireland, Switzerland, the U.K. and Germany.Table 7 summarizes the investment position Bermuda holds in the United Statesrelative to other investing countries. Here the Table shows the accumulated directinvestment each country holds with the United States. The equity invested from amerger or acquisition of a company along with the reinvested earnings and debt raisedto support that enterprise in the United States. At $55 billion, Bermuda is the 9th largestinvestor in US productive job-creating sectors. The table shows that Bermuda’sinvestment in the United States is larger than China, India, Hong Kong and all theCaribbean offshores combined.Since 2007, investing in the United States by Europe and Bermuda mostly contractedand only in 2011 did investment levels begin to recover. At the same time, Asian andMiddle East investment expanded into the United States. Likely the effect of the majoreconomic crisis in the United States and Europe, but there also may be a long termsecular trend that Asia and Middle East are relatively more significant in the USeconomy.The United States, for the first time, became a significant investor in itself using foreignfunds raised by US multinational affiliates from outside the United States. This islargely a result of US private equity funds originating in the United Stats but investedin offshore funds and enterprises buying US assets. As discussed later in this paperthese investments frequently involve Asian partners and both regions significantly relyon Bermuda as an offshore domicile for the investment vehicle.Altogether a job created in the United States by Bermuda’s direct investment wasequivalent to 200,000 employees.Transnational Analytics LLC 19 Washington DC
  • 20. Business Bermuda September 2012 Table 7 Foreign Direct Investment (FDI) Positions Into the United States by Country of Ultimate Beneficial Owner: 2000-2011 (Billions of U.S. Dollars) Country 2000 2007 2008 2009 2010 2011 United Kingdom 326.0 512.1 496.5 472.5 455.0 527.8 Japan 161.9 226.5 237.8 240.1 256.1 293.8 Germany 131.9 232.4 207.5 223.7 248.9 265.4 Canada 127.9 206.0 194.3 210.8 221.8 244.6 France 124.3 157.0 166.9 180.7 183.6 202.0 Switzerland 54.2 76.8 72.8 65.8 88.3 126.1 Ireland 6.4 18.9 51.1 93.6 102.8 98.5 USA 10.2 39.7 33.4 37.1 70.1 71.8 Bermuda 38.1 77.8 100.9 38.0 48.4 51.3 Other Notables: Hong Kong SAR 13.0 5.9 11.3 11.2 10.5 10.9 China Mainland 0.0 0.5 1.3 2.0 5.1 9.5 India 0.0 3.0 4.7 3.9 8.6 9.8 Caribbean Offshores 6.0 14.0 13.0 3.0 10.0 17.0Note: NS – Not Significant; NA – Not Available. These are not total Bermuda imports or exports but the tradewith the listed countries.Historical Cost FDI Positions- Such investment that establishes a lasting presence in a recipient national economyand with a significant degree of influence. Such a position reflects the cumulative stock of investment built up overtime in the economy valued at historical costs.Ultimate Beneficial Owner – The investment by the country into the United States reflects the ultimate source ofcontrol in spite of a chain of many layers of holding company investors of many countries. Most offshore investingcountries have layers of origin to their investment as opposed to large countries where the ultimate owner iscoincident with the investing country of record in the United States. The United States records $5billion of directinvestment from Bermuda in 2010 but $55 billion of investment coming from the world where the ultimatecontrolling investor is located Bermuda.Source: U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current Business, October 2011.;PRC Ministry of Commerce, 2010 Statistical Bulletin; Hong Kong Census and Statistics Department, SelectedReports;; Department of Statistics Singapore, Selected Reports; Reserve Bank of India, Balance of Paymentsreports; IMF Coordinated Direct Investment Surveys 2009 and 2010.: OECD, Stat Extracts, EBOPS 2010 databaseon Trade in Services.Transnational Analytics LLC 20 Washington DC
  • 21. Business Bermuda September 2012Tables 8 and 9 round out the complete economic picture of Bermuda’s role in theUnited States. These tables summarize the significance of Bermudian multinationalinvestment in the United States. The Department of Commerce estimates the output inthe United States of Bermudian companies that provide predominantly services andthat is presented below between 1999 and 2010 (the latest public data available).Bermuda-based services companies, particularly in the financial sector have expandedinto the United States acquiring subsidiaries and producing American jobs andrevenues. Table 8 shows that total foreign multinational majority owned U.S. affiliatesmore than doubled their U.S. sales of services to U.S. persons between 1999 and 2010,increasing from $293 billion to $690 billion. In the same period, Bermudian owned U.S.affiliates increased their sales to U.S. persons from $6 billion to $21 billion. Table 8 Sales by United States and Bermudian Affiliates of Majority Owned Multinationals by Country: 1999-2010 (Affiliated and Non-affiliated) (All Banking and Non-Banking Services 1/) (Millions of U.S. Dollars) Year U.S. MOFA U.S. MOFA Foreign owned Bermuda- Sales in Rest of Sales in MOUSA sales owned World2/ Bermuda2/ in U.S.3/ MOUSA sales in U.S.3/ 2000 413,470 7,929 344,389 6,391 2002 423,508 7,882 367,614 18,732 2003 452,496 10,253 374,119 18,842 2005 725,036 7,494 571,174 <20000 3/* 2006 889,820 9,990 648,286 24,313 2007 1,019,225 12,760 683,286 25,603 2008 1,116,932 15,000 *3/ 701,589 29,676 2009 1,076,439 16,096 668,811 19,445 2010 1,101,003 19,700 690,754 20,545Source: U.S. Department of Commerce. Bureau of Economic Analysis, Survey of Current Business, October20111/ MOFA – Majority-owned foreign affiliates supplying services to affiliated and non-affiliated foreignpersons in the rest of the world and in Bermuda.2/ MOUSA – Majority-owned U.S. affiliates supplying services to U.S. affiliated and non-affiliated U.S.persons either from the rest of the world or Bermuda.*3/ Data for 2005 and 2008 for Bermuda services supplied to the United States was suppressed by thestatistical reporting agency so as to avoid disclosure of data of individual companies. However, reportedinformation for those years for all of Western Hemisphere increased an average of 15% per year.Bermuda traditionally constitutes more than 55% of the Western Hemisphere and we estimate thatBermuda was likely $20 billion or more in that year.Transnational Analytics LLC 21 Washington DC
  • 22. Business Bermuda September 2012The employment data in Table 9 cover affiliates of all multinationals operating in theUnited States, both manufacturing and service-based. The data shows that employmentassociated with foreign-owned affiliates stopped growing in 2002 and has remainedsteady at about 5.5 million employees for the past 10 years or more. During the sameperiod, Bermuda multinational affiliates had a substantial employment presenceaveraging about 200,000 employees. A large part of these affiliates were former U.S.companies that relocated from the United States to Bermuda to adapt to therequirements of international business. Bermuda provided an offshore platform toconduct business in proximity to the United States and also with the rest of the world.In 2007-2009, many of these former US companies decided to relocate again toSwitzerland and Ireland with the result that many affiliates and their employees wereno longer reporting to an ultimate beneficial owner in Bermuda.Those jobs associated with those inverted companies are still in the United States andstill controlled by offshore interests, but not Bermuda.The more important trend to observe in Table 9 that bears directly on U.S.-Bermudarelations is that Bermuda-based investment is expanding jobs in the United States from40,000 in 1996 to 170,000 in 2010. This is the case even as foreign affiliate employmentrelying on a U.S. platform for Canada, Japan and the United Kingdom has declined byalmost 200,000 jobs. Table 9 Done Employment of Majority-Owned U.S. Affiliates, by Country of Ultimate Beneficial Owner and US Private Equity Investors: 1996- 2010 (Thousands of Employees) Year Total U.S. Bermuda UK Japan Canada 1996 5105.0 40.4 988.2 788.8 608.9 2002 1/ 5570.0 215.4 991.6 621.0 472.5 2006 5330.5 193.8 908.8 631.0 457.4 2007 1/ 5588.2 193.2 977.2 682.1 546.0 2008 1/ 5636.2 207.0 977.9 690.0 509.8 2009 5290.3 190.0 908.4 663.7 489.5 2010 5270.4 170.0 879.2 664.9 536,7Source: U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current Business, August 2012and Albright Stonebridge estimates based on U.S. company announcements of establishment employment and investment relocation plans .In 2007-2009, Bermuda saw the relocation of many Bermudian corporateheadquarters with manufacturing interests in the United States to Switzerland or Ireland resulting in a decline inU.S. jobs attributable to Bermuda. Also in 2008-2010, US and Chinese multinationals investing in United StatesTransnational Analytics LLC 22 Washington DC
  • 23. Business Bermuda September 2012semiconductors and other manufacturing sectors domiciled in Bermuda. 1/ Due to the availability of newsources of data, U.S. estimates for 2002, 2007 and 2008 include banking sector revenues.In summary, Bermuda’s contribution to employment in the United States comes fromthree sources as shown in this study and totals about 300,000 jobs. 30,000 U.S. jobsdepend on the manufactured exports to Bermuda. Some 71,000 U.S. jobs are a result ofthe direct employment generated by Bermuda owned affiliates in the United Statesselling products (mostly financial services) to U.S. persons. And finally, some U.S.190,000 jobs dedicated to producing and exporting services to Bermuda.Insurance and the U.S. Economy. Insurance protection against commercial and personalrisk is critical to the functioning of the U.S. economy. It provides a safety net againsteconomic disruption when sudden adverse events occur. In capital-starved areas of theUnited States, for instance, a crop failure can bankrupt a family farm. Large losses froma tropical storm can make it impossible to obtain a mortgage or other credit to rebuild abusiness or a home. On a larger scale, events like Hurricane Katrina and the September11 attacks can cause massive, widespread economic disruption.The mitigation of these risks through property and casualty insurance and reinsurancepromotes stability in the overall U.S. economy. The U.S. National Association ofInsurance Commissioners estimates that American insurance companies write directpremiums for life, property and casualty of more than $1 trillion a year, making the U.S.the largest insurance consumer in the world.Of this $1 trillion in annual premiums, $100 billion is written to cover multi-perilhomeowners and commercial property insurance. And yet, since 2000, property lossesfrom certain catastrophic events like hurricanes have regularly exceeded the amount ofpremiums paid to U.S. insurance companies. While the United States does rely onmany other elements of risk transfer, such as, U.S. reinsurance, the U.S. capital market,and the American taxpayer, to expand available capital and spread financial risk, theU.S. insurance industry lacks the financial capacity to fully cover hurricane and othernatural disaster losses as well as terrorist attacks. A global pool of capital is necessaryto diversify the outsize risks from disasters in the United States.As a major reinsurance and insurance provider, Bermuda serves as a critical backstop tothe U.S. insurance sector. Bermuda’s insurance capacity, as it pertains to the UnitedStates, falls into three general categories: natural disasters/catastrophic coverage, U.S.farmers and crop insurance, and corporate self-insurance. Bermuda specializes in thesesectors of risk; its insurance industry having built its commercial and regulatoryTransnational Analytics LLC 23 Washington DC
  • 24. Business Bermuda September 2012capability in these sectors over decades. To a greater and lesser degree, Bermudastakeholders consciously stepped forward to meet these U.S. needs as competitiveinsurance capacity, first in the United Kingdom and then in the United States,weakened and faltered.Investment Funds. In 2008, Bermuda domiciled 1,133 regulated investment funds withalmost $200 billion in net assets. Most Bermudian investment funds are offshore fundsestablished by U.S. money managers.Bermuda is attractive to U.S. investors for a variety of reasons. First, Bermuda providesa global investment platform that attracts international capital. Second, investors fromaround the world view Bermuda as well regulated, primarily because as a territory ofthe United Kingdom, Bermuda has close legal and administrative affinity with the U.K.regulatory system. Financial stakeholders have recourse to U.K. courts and the U.K.Financial Services Agency has strong relations to the Bermuda Monetary Authority.Third, Bermuda’s tax system is attractive to most global investors. Bermuda does nottax worldwide income and does not impose a personal or corporate tax. Fourth,Bermuda has physical proximity to U.S. East Coast money managers. By establishinginvestment funds in Bermuda, U.S. fund managers can attract international investorsthat seek favorable tax treatment, and with all the regulatory safety and transparency ofthe U.K., only two hours by plane from New York.U.S. investors are also attracted to Bermuda investment funds. Most U.S. investors inBermuda-domiciled mutual funds and hedge funds are non-profits like pension fundsand corporate investors that are indifferent to tax differences between the United Statesand Bermuda.Insurance and reinsurance financing. Bermuda’s reinsurance industry is constantlyraising new financing to support its expanding lines of business, and it attracts U.S.investors looking for potentially high returns within a solid regulatory framework.Reinsurance is riskier than primary insurance, but provides higher returns. OtherBermuda industries – such as captive insurance, aircraft leasing and ship financing --also attract investment funds from around the world.One of the primary drivers of new reinsurance capital issuance in Bermuda has been theincreasing interest of hedge funds in investing in that market. Hurricane Katrina in 2005spurred an influx of Bermuda-based insurance and reinsurance capacity, supported byspecial purpose investment funds that are easy to establish in Bermuda. Hedge fundshave poured billions of dollars into reinsurance entities in Bermuda, wagering that therecord hurricane losses of 2005 would drive higher insurance and reinsurance policyTransnational Analytics LLC 24 Washington DC
  • 25. Business Bermuda September 2012holder rates with U.S. state regulators, and thus making investment in propertycatastrophe insurance and reinsurance a good bet. (Hurricane-susceptible stategovernments like Florida are indeed trying to deal with a continuing trend towardhigher insurance rates. Federal and state taxpayers are being asked to foot the bill forhurricane-exposed cities, but with government budgets in deficit, there seems to be littlealternative to higher insurance rates.)To at least partially meet the demand for more U.S. insurance at lower costs topolicyholders, Bermuda financial regulators have been asked to authorize innovativecapital-raising products. Hedge funds in particular have been attracted to innovativenew types of risk capital that the Bermuda market has developed to supplementtraditional reinsurance entities in covering catastrophic losses. One example is“collateralized reinsurance”, through which the reinsurer reserves a certain amount ofcapital to collateralize the risks that it is underwriting. This is attractive to hedge fundsbecause it improves the creditworthiness of the reinsurer.Another example is catastrophic (CAT) bonds, which are issued by insurance andreinsurance companies to help them access additional funds following a disaster. Iflosses from a catastrophe exceed a certain amount, then the bond defaults. However, ifno disaster occurs, then the holder of the bond is paid at a higher than normal interestrate. Hedge funds are among the biggest buyers of CAT bonds.In addition, hedge funds have been attracted to another innovative financial vehiclecalled industry loss warranties, which allow parties to purchase protection based onlosses to the entire insurance industry, rather than losses from a particular catastrophe.Hedge funds have also been big investors in “sidecars”, special-purpose entities createdto provide additional capacity to existing reinsurers, usually for property catastrophesand marine risks. The sidecars receive premiums for the reinsurance underwritten andare liable to pay claims under the terms of the reinsurance contracts. The sidecarenables the reinsurer to expand its capacity to write additional reinsurance. Nearly allsidecars to date have been established in Bermuda, because of Bermuda’s favorableregulatory and tax systems. Overall, the Bermuda market has become much moreefficient and effective in recent years in providing new risk capital for propertycatastrophe insurance, thanks in part to its favorable regulatory and tax structures. Thishas been critical as the American demand for catastrophic risk coverage in Florida andother disaster-prone areas has grown. That need is expected to continue, as the currentrecession and financial crisis undermine traditional insurance and state hurricane andwind funds.Transnational Analytics LLC 25 Washington DC
  • 26. Business Bermuda September 2012Bermuda’s U.S. Portfolio Investment. Bermuda is the 10th most important internationalportfolio investor with the United States. From 2000 to 2010, Bermuda doubled its U.S.portfolio investment to $199 billion. Bermudian investors are the 15th largestinternational purchasers of U.S. Treasuries and USG agency asset-backed bonds.Because of Bermuda’s success as an international financial center, it is likely that majorportions of the capital flowing into U.S. securities are as much international-originhedge fund capital as capital accumulated by Bermuda reinsurance vehicles. It is alsonoteworthy that for most of the 2000s, Bermuda’s allocation of portfolio investment inU.S. government securities has been at similar levels as shown below in Table 11. Table 10Country Ranking of Leading Foreign Holders of U.S. Securities: 2011 (Millions of U.S. Dollars) Country U.S. LT Treasuries Other U.S.G. Bonds All LT ST Debt & Equity China 757112 454095 1462721 Japan 645957 219128 1269587 UK 54448 15759 812773 Cayman Islands 19121 42503 649751 Luxembourg 51846 23260 586222 Belgium 14727 14745 429188 Ireland 17512 33768 347955 Canada 15942 3826 339143 Switzerland 55548 14405 328238 Hong Kong 58786 63015 220514 Netherlands 13389 17000 232638 Bermuda 17589 38822 199374Source: U.S. Treasury Department, Treasury International Capital System, TICS web site --www.treas.gov/tic, 2012.The United States depends in large part on energy products -- including crude oil,petroleum products and LNG (liquefied natural gas) -- that are shipped from foreign oilfields to U.S. refineries. In fact, tanker fleets from foreign oil fields transport 55% ofAmerica’s total crude oil supply.Two Bermuda companies own the largest number of tankers in the world’sindependent fleet: American Eagle and Frontline. (These Bermuda domiciledcompanies are in turn owned by holding companies in Asia and Norway, respectively.Transnational Analytics LLC 26 Washington DC
  • 27. Business Bermuda September 2012To take advantage of Bermuda registry and regulation, the fleet must be Bermuda-domiciled.) American Eagle concentrates on Aframax class and smaller vessels that arewell suited for the lightering that is required to access the shallow ports and waters ofU.S. Gulf Coast refineries. Frontline mostly provides shipping services in very large,deep ocean LNG ships like Suezmax-class, VLCC and ULCC class vessels. U.S. oilcompany tanker fleets also serve U.S. refineries and some of these ships serving theGulf Coast are Bermuda-registered. The crude oil tanker fleet is well established in U.S.ports, and the LNG fleet is growing in significance to the United States.Bermuda is a major supplier of energy shipping services to the United States. The U.S.Customs Service and the Corps of Engineers, which tracks ocean ships entering U.S.waters and ports transporting imports, reports that Bermuda-owned, regulated andregistered ships provide $1.3 billion, or 4%, of the shipping services upon which theUnited States depends for its imports. More than 90% of these shipping services fromBermuda to the United States are for crude oil imported on Bermuda tankers torefineries in the U.S. Gulf Coast.Bermuda’s Energy Shipping Fleet. Bermuda has a total of 158 commercial ships in itsnational registry; constituting approximately 10 million dead weight tons of capacity.Almost 50% percent of this registry by tonnage is energy transport vessels -- threemillion tons of deep ocean, very large LNG ships, and one million tons of oil tankerships. The average age of the Bermuda energy fleet is under six years and meets themost modern safety standards imposed by International Maritime Organization and theU.S. Coast Guard.While the condition of tankers in the worldwide fleet varies widely, the Bermuda fleetreceives high marks for its safety and environmental standards, according to DavidAstwood, a Bermuda shipping attorney and sectoral expert who analyzed the Bermudafleet in recent publications (referenced in the annex). Astwood notes that the Bermudaregistry and ship inspectorate (officially known as the Bermuda Department ofMaritime Administration) is unique in that, as a territory of the United Kingdom, it fliesthe UK’s Red Ensign, thus showing compliance with high quality U.K. regulatorystandards for safety and operation. The advantage is that environmental and safetyissues for Bermuda ships are rare and they experience fewer delays due to inspectionissues.In addition, Bermuda’s tanker fleet is compliant with U.S. environment liabilityrequirements of the Oil Pollution Act of 1990, and is known among operators as havinga high reliability of operation, with infrequent oil spills and discharges and few portdelays.Transnational Analytics LLC 27 Washington DC
  • 28. Business Bermuda September 2012These qualities are particularly important in dealing with U.S. refineries along the GulfCoast, which rely upon the Bermuda tanker fleet’s ability to safely access shallow ports,while keeping costs low and meeting the environmental requirements of the U.S. CoastGuard.Bermuda also has a thriving international ship finance and registration industry.Because of its strength as an international financial center, many of the world’s leadingowners, managers, builders, insurers, lawyers, accountants and bankers have workedclosely with Bermuda to develop financial structures tailored to the specificrequirements of the shipping industry.In the past few years, there have been significant developments in Bermudian shipfinancing, which has been experiencing an economic boom. The most significantdevelopment in ship financing has been a surge in initial public offering activity byBermuda-based shipping groups, particularly in the U.S. capital markets, and theincreasing use of Bermuda as a base, both for companies and for the registration ofvessels, for LNG ships. The surge in shipping IPO activity is evidenced by suchBermuda companies as Arlington Tankers, TBS International and Aries MaritimeTransport, which are listed on the New York Stock Exchange in Arlington’s case and theNASDAQ National Market in the others.It is expected that Bermuda-based shipping companies will continue to be used forlistings on stock exchanges in the U.S., Europe and Asia, as long as the appetite forpublic offerings continues.Another significant development is the increasing use of Bermuda as a base ofoperations for LNG shipping groups. As shipping groups have positioned themselvesto move into LNG as an alternate source of energy, Bermuda has proved an attractivejurisdiction, acceptable to ship-owners and, more important, to charterers, for flaggingLNG vessels and incorporating their owning companies.Transnational Analytics LLC 28 Washington DC
  • 29. Business Bermuda September 2012V. Bermuda’s Growing Economic Profile with the Rest of the World – Asia, Europe,and Key Holding Company CentersMainland China, Hong Kong SAR, and Singapore The economic data published byAsian governments in the Tables 13, 14 and 15 reveal that these countries maintain amodest but growing economic relationship with Bermuda. Direct trade with Bermudafor these countries in goods and services are still at modest levels. Mainland Chinadoes export $100 million to $300 million annually of goods to Bermuda. While China’strade in services from the mainland is not significant, Singapore and Kong Kong’s tradein services with Bermuda are growing rapidly including insurance, business services,transportation services and testing. Two-way trade among these three countries andBermuda was close to $3 billion in 2010 – up from significantly lower level in 2004.Altogether two-way trade with Bermuda for the three countries amounted to $7 billionin 2010. But it is the growth in the levels of foreign direct investment between Asia andBermuda that stands out in these tables. In 2010 levels of investment from Bermuda tothe three countries in the region rose to $25 billion – a threefold increase since 2004.Bermuda is a bigger investor into these three nations, particularly Singapore than arecipient. It is likely that this trend is driven by the economic crisis as investmentfunds find new ways to invest with the United States and Europe affected by the crisis.But the outflows of investment to Bermuda show a significant trend for globalization inAsia has taken root.Singapore attracts mostly financial insurance and business services trade andinvestment and has been growing rapidly since 2009. But Bermuda is a growing partof the economic activity of China and Hong Kong also as a holding company center andgateway for investors into the United States.Transnational Analytics LLC 29 Washington DC
  • 30. Business Bermuda September 2012 Table 11 China Economic Relations with Bermuda: 2004-2010 (Billions of U.S. Dollars)Year Exports Imports Services Services FDI FDI to from X to M from Positions Positions Bermuda Bermuda Bermuda Bermuda into from Bermuda Bermuda2004 0.1 0 NS NS 0.2 NA2005 0.1 0 NS NS 0.3 NA2006 0.1 0 NS NS 0.2 NA2007 0.0 0 NS NS 0.1 NA2008 0.1 0 NS NS NS NA2009 0.1 0 NS NS 0.2 6.52010 0.3 0 NS NS 0.4 7.1Notes: NS: Not Significant , NA Not AvailableSource: IMF, Coordinated Direct Investment Survey, 2010, 2009. PR China, Mofcom. 2010, Statistical BulletinChina’s Outward Foreign Direct Investment.; MOFCOM, China’s Trade in Services.It is important to recognize that Bermuda has become one of the most importanteconomic actors in the world economy connecting Asian manufacturing to the UnitedStates as we saw from the direct investment trends in Table 1 above. For example, theHong Kong lists more than 500 Bermuda companies registered on its stock exchange.This is also true to some greater or lesser degree in Taiwan and Singapore. The strongand growing presence of Bermuda-registered companies in the world economy reflectsthe realities of the economic relations between the United States and Asia, particularlyChina. On one hand, U.S. investors in production facilities in China to supply the U.S.and global markets prefer a secure legal jurisdiction like Bermuda with efficientcorporate governance rather than the difficult and bureaucratic regulatory environmentin China. On the other hand, Chinese and American investing partners prefer thebenefits of structuring holding company multinationals to ensure tax benefits thatwould otherwise be unavailable by simply incorporating in China or the United States.The outcome is that manufacturing investors from semiconductor manufacturers tochemical companies obtain the benefits of Bermuda’s secure and transparent legalgovernance environment, access to Asian manufacturing competitiveness, and a moreTransnational Analytics LLC 30 Washington DC
  • 31. Business Bermuda September 2012competitive tax structure by domiciling in Bermuda. Moreover, recent experienceshows that Asian companies like Haier are using their Bermuda domicile as theplatform for their investment in manufacturing in the United States. So Bermudaholding company governance structures are making Chinese FDI into the United Statesmore competitive and thereby creating jobs in the United States.Finally, during the 2000s former U.S. operating companies continued to domicile inBermuda for the same reasons that Asian companies invest in multinational structuresdiscussed in the paragraphs above. Companies like Freescale, Marvell, Contel, AOSL,and Chipmos, to name a few fables chip companies, were formerly U.S. companies andredomiciled to Bermuda since 2006. Today, these Bermuda companies employ 30,000U.S. workers in manufacturing and sales. Since 2008, these companies created $3 billionof service-based export business to Bermuda in testing and R&D services creating moreU.S. jobs. So altogether, Bermuda has become an important component of how global“holding company” multinationals that rely on U.S. jobs as well as related Asianoperations. Bermuda governance and investment environment contributes to thecompetitiveness of U.S. business investment, where a U.S. multinational or an Asianmultinational would simply not perform as well. Table 12 Singapore Economic Relations with Bermuda: 2004-2010 (Billions of U.S. Dollars)Year Exports Imports Services Services FDI FDI to from X to M from Positions Positions Bermuda Bermuda Bermuda Bermuda into from Bermuda Bermuda2004 0.0 0.0 NS NS NS 4.02005 0.0 0.0 NS NS NS 6.02006 0.0 0.0 0.05 0.05 NS 10.02007 0.0 0.1 0.06 0.07 NS 11.02008 0.0 0.1 0.06 0/1 0.1 12.02009 0.1 0.2 0.1 0.1 0.1 13.42010 0.1 0.3 0.2 0.2 0.1 15.4Notes: NS – Not significantSource: Government of Singapore, Statistics Singapore, Singapore’s Investment Abroad; Foreign Equity Investmentin Singapore 2010 ; Singapore’s International Trade In Services 2010Although modest perhaps compared to other countries that have been doing businesswith Bermuda for decades, Hong Kong’s trade in services with Bermuda has reachedTransnational Analytics LLC 31 Washington DC
  • 32. Business Bermuda September 2012important levels. Bermuda is the third largest trading partner in the services sector forHong Kong in 2010 behind only China, PR and the British Virgin Islands. Whileinvestment positions seem small for the two islands –Hong Kong and Bermuda, thetrade levels with Bermuda are the largest in the region. There is no trend discerniblefrom the data over time. Bermuda is as important now as in 2004. Table 13 Hong Kong Economic Relations with Bermuda: 2004-2010 (Billions of U.S. Dollars)Year Exports Imports Services Services FDI FDI to from X to M from Positions Positions Bermuda Bermuda Bermuda Bermuda Into from Bermuda Bermuda2004 0.0 0 0.9 0.2 NA NA2005 0.0 0 1.0 0.2 0.02 0.042006 0.0 0 1.1 0.2 0.02 0.052007 0.0. 0 1.1 0.3 0.02 0.052008 0.0 0 1.2 0.4 0.02 0.052009 0.0 0 1.2 0.3 0.03 0.062010 0.0 0 1.4 0.4 0.03 0.08NA: NOT AVAILABLESource; Hong Kong SAR government, Census and Statistics department, External Direct Investment Statistics2010; Hong Kong SAR, Report on Hong Kong Trade in Services Statistics for 2010. IMF, Coordinated DirectInvestment Survey. Trade Statistics.The European Holding Company Centers – Netherlands and Ireland.Bermuda’s economic relations with the Netherlands and Ireland show another trendthat has intensified in the last decade. Trade and investment with Bermuda of thesecountries reflects the key position Bermuda holds as an administrative and businessservices bridge between the United States and its European markets. As Europe andthe United States has moved to adopt the holding company as the chief form forinternational sales and revenue management and as off shore regulation ofmultinationals have become more complex, the Netherlands and Ireland have becomemore prominent in partnership with Bermuda for transnational corporations as aplatform for direct investment. Bermuda’s economic relations with Ireland and theNetherlands are some of the largest in the world. Direct investment among thesecountries is in the $100s of billions. With that level of investment comes a significantlevel of business and professional services trade that maintains those relations.Transnational Analytics LLC 32 Washington DC
  • 33. Business Bermuda September 2012 Table 14 Netherlands Economic Relations with Bermuda: 2004-2010 (Billions of U.S. Dollars)Year Exports Imports Services Services FDI FDI to from X to M from Position Position Bermuda Bermuda Bermuda Bermuda to from Bermuda Bermuda2004 0.01 0 0.01 1.9 NA NA2005 0.01 0 0.2 1.2 NA NA2006 0.01 0 0.2 2.6 NA NA2007 0.01 0 1.6 1.7 NA NA2008 0.01 0 0.1 7.5 117.9 137.62009 0.01 0 0.4 10.3 78.3 173.72010 0.01 0 0.5 10.6 131.0 191.7Source: Central Bureau for Statistics, Netherlands Statline, International Handel; De Netherlandische Bank, BOP;IMF, Coordinated Direct Investment Survey. 2008-2011.Bermuda and Ireland trade and investment are dominated by the insurance andfinancial investment sectors. In 2010, Bermuda was Ireland’s largest investor and alsothe largest recipient of investment from Ireland. Trends between Ireland and Bermudahave been largely driven by the economic crisis in Europe. The Netherlands was onceIreland’s largest investor. This Dutch position in Ireland was significantly supported byUS and European holding companies and sales affiliates who invested in Ireland and inturn holding companies in Bermuda to handle offshore revenues and taxation. AsEurope contracted during the crisis so did trade and investment between theNetherlands (a holding company center for Germany and France and elsewhere inEurope and Ireland. Investors and service providers located in continental Europe anddependent on sales revenues from European markets pulled back from Ireland and thisin turn affected trends with Bermuda. Hence service exports to Bermuda declined andinvestment positions had a tendency to level off. Nevertheless Bermuda/Irish directTransnational Analytics LLC 33 Washington DC
  • 34. Business Bermuda September 2012investment in each other stands at $100 billion in 2010 and that is a huge increase fromthe $20 billion levels a few years ago. Table 15: Ireland Economic Relations with Bermuda: 2004-2010 (Billions of U.S. Dollars)Year Exports Imports Services Services FDI FDI to from X to M from Position Position Bermuda Bermuda Bermuda Bermuda into from Bermuda Bermuda2004 NS NS 1.0 3.7 NA NA2005 NS NS 1.5 3.8 6.8 13.92006 NS NS 1.0 3.3 4.0 12.02007 NS NS 1.2 3.4 7.0 14.02008 NS NS 1.7 3.3 11.0 20.62009 NS NS 1.8 4.1 60.4 28.62010 NS NS 1.3 4.1 73.8 37.4Notes: NS- Not Significant, NA- Not AvailableSource: Government of Ireland, Central Statistics office, Foreign Direct Investment 2007 and 2011; Exports andImports of Services; and Trade Statistics. IMF, Coordinated Direct Investment Survey.Western Europe and Bermuda Most major European economies have large tradelevels with Bermuda in insurance, finance and business services. Switzerland andBermuda hold a combined total of $108 billion of direct investment in each other. Thatlevel is down $30 to $40 billion since 2007. But trade in services remains at a high levelcompared to the other European countries and is largely based on Swiss insuranceexports to Bermuda. Switzerland has been the largest relationship that is intensivelyover insurance services. The economic crisis seems to have slowed Switzerland andBermuda’s economic connection. This may be due to the changes in global insuranceTransnational Analytics LLC 34 Washington DC
  • 35. Business Bermuda September 2012market as well as Swiss companies decisions on pursuing the US market during theeconomic crisis. Table 16 Switzerland Economic Relations with Bermuda: 2004-2010 (Billions of U.S. Dollars)Year Exports Imports Services Services FDI FDI to from X to M from Positions Positions Bermuda Bermuda Bermuda Bermuda into from Bermuda Bermuda2004 NS NS 4.8. 0.1 NA NA2005 NS NS 4.1 0.4 NA NA2006 NS NS 4.7 0.5 113.0 28.82007 NS NS 5.9 0.7 99.3 31.02008 NS NS 6.4 0.7 90.9 35.62009 NS NS 6.1 0.9 103.3 16.02010 NS NS 5.1 0.9 97.6 10.6Source: Schweizerische National Bank, Swiss Trade in Services with foreign Countries; Swiss Direct Investment inother ountries.After the United States, the UK is the largest trading nation with Bermuda but one of itssmallest direct investors. Two-way investment levels are about $40 billion bilaterallyand that decrease is largely a result of the financial crisis. Trade in services is large andwhile dominated by financial services and insurance, includes all major categories ofservices from tourism to business services. These trade levels were all adverselyaffected by the economic crisis of 2008/9 and given Bermuda and UK’s longstandingbusiness together will likely return in the future.Transnational Analytics LLC 35 Washington DC
  • 36. Business Bermuda September 2012Transnational Analytics LLC 36 Washington DC
  • 37. Business Bermuda September 2012 Table 17 United Kingdom Economic Relations with Bermuda: 2004-2010 (Billions of U.S. Dollars)Year Exports Imports Services Services FDI FDI to from X to M from Positions Positions Bermuda Bermuda Bermuda Bermuda into from Bermuda Bermuda2004 0.05 0.1 1.3 0.3 20.3* NA*2005 0.03 0.03 1.1 1.3 21.5* NA*2006 0.03 0.1 1.3 2.2 25.7* NA*2007 0.1 0.04 1.5 2.4 27.7* NA*2008 0.3 0.1 1.3 2.5 48* NA *2009 0.03 0.05 1.2 2.3 25.6** 12.5**2010 0.04 NS 0.9 1.6 27.3** 15.4**Notes NA Not Available NS Not significant * from UK ONS data and reports ** from IMF CDIS .Source: Office of National Statistic (ONS)s, International Trade in Services, 2010; IMF Coordinated DirectInvestment Survey. ONS FDI 2005-2011.For Germany, the economic relationship with Bermuda is dominated by insurancefollowed by air transport services. Imports and exports of services expandedsubstantially from 2004 and plateaued during the economic crisis. Table 18: Germany Economic Relations with Bermuda: 2004-2010 (Billions of U.S. Dollars)Year Exports Imports Services Services FDI FDI to from X to M from Positions Positions Bermuda Bermuda Bermuda Bermuda Into from Bermuda Bermuda2004 NS NS 0.1 0.3 NA NA2005 0 NS 0.6 0.7 NA NA2006 0.1 0.1 0.2 0.3 3.1 2.02007 NS 0,1 0.3 0.4 2.5 3.02008 NS NS 0.5 0.5 2.7 3.12009 1.4 0.1 0.5 0.5 2.2 3.62010 0.1 0.1 0.5 0.6 1.7 4.6Source: Government of Germany Statisches Bundesamt, Aussenhandel, 2005-2011; IMF, CoordinatedDirect Investment Survey; Deutsche Bundesbank, Dienstleistungsverkehr der BundesrepublikDeutschland, 2005-2011Transnational Analytics LLC 37 Washington DC
  • 38. Business Bermuda September 2012France has as large an economic relationship with Bermuda as Germany. Investmentpositions between Bermuda and France are $12 to $14 billion and trade in servicesseems to have decreased by $0.5 billion with Bermuda since earlier in the decade. Table 19: France Economic Relations with Bermuda: 2004-2010 (Billions of U.S. Dollars)Year Exports Imports Services Services FDI FDI to from X to M from Positions Positions Bermuda Bermuda Bermuda Bermuda into from Bermuda Bermuda2004 0.3 NS 0.8 0.2 NA NA2005 0.3 NS 0.8 0.1 NA NA2006 0.3 NS 1.1 0.1 NA NA2007 0.3 NS -1.6 0.2 NA NA2008 0.3 NS -1.2 0.1 NA NA2009 0.3 NS 0.3 0.2 7.2 5.02010 0.3 NS -0.4 0.1 9.2 6.3Notes: The negative signs for service exports are difficult to interpret. Usually negative exports are not associatedwith gross exports. This apparent data anomaly will require further analysis.NA – Not available NS Not significantSource: OECD IMF, Govt of France, Commerce Exterieur, Ministry of Economy and Finance,Altogether Western Europe trade with Bermuda results in 250,000 jobs.A Final Word on IndiaUntil 2006 India maintained strict controls on investment and foreign trade. Since thishas changed as India has engaged with the world economy. The legacy of this isolationstill persists as its investment and trade outside the region is limited particularly withBermuda. This study found no significant levels of trade in goods and services withBermuda. Investment is dominated by Mauritius, Singapore and Hong Kong. India’seconomic profile with Europe, Canada and the United States is growing but remainsunder domestic regulatory controls that limit the methods of globalization seen with theUnited States, Europe and offshore holding company centers.Transnational Analytics LLC 38 Washington DC
  • 39. Business Bermuda September 2012APPENDIX A: Methodologies and NotesEconomic Data. This study relies to a substantial extent on official government data todescribe and assess the impact of Bermuda’s economic relationship with the UnitedStates. For the most part, this study sought to use one integrated set of data withcommon definitions and estimating techniques and then supplement that as necessarywith specific data. Therefore, for most of this study we relied on U.S. government datathat describes the U.S. international transactions with the rest of the world. Thisinformation is compiled by the U.S. Bureau of Economic Analysis (BEA) within the U.S.Department of Commerce in annual surveys of the business community. Internationalservices trade data are a major characteristic of the Bermuda-United States economicrelationship. The essential methodologies for compiling this data and reporting itannually was summarized in “Selected Issues in the Measurement of U.S. InternationalServices,” Survey of Current Business, by Obie Whichard and Maria Borga, U.S. Bureauof Economic Analysis, June 2002. Additional revisions to methodology for internationalinsurance services measurement were summarized in “Annual Revision of the U.S.International Accounts, 1989-2003.” Survey of Current Business, by Christopher L. Bach,U.S. Bureau of Economic Analysis, July 2004.Importantly, 2010 Bureau of Economic Analysis publications on International ServicesTransactions between the United States and Bermuda were updated by the BenchmarkSurvey of Insurance Transactions by U.S. Insurance Companies with Foreign Personsfor 2008. This broader survey obtained every 5 years covers many more companiessupplied by the U.S. National Association of Insurance Commissioners (NAICs). Thisreport also benefited by the expansion of concept and measurement by BEA to includeinternational banking financial services transactions between parents and affiliates inmajority owned MNCs beginning in 2008.Similar balance of payments information is compiled regularly by the Government ofBermuda but these published Bermudian accounts present no bilateral U.S.-Bermudadetail. Happily, the BEA information is quite detailed with respect to Bermuda and alsooffers a basis to make relative comparisons with other U.S. trading partners. The otherofficial source of information for the study is the U.S. Treasury Departments “TreasuryInternational Capital Account.” Again this information is based on a compilation ofmandatory monthly reporting of all financial brokers and investors investing in theUnited States.Transnational Analytics LLC 39 Washington DC
  • 40. Business Bermuda September 2012The Treasury and Commerce Department data has substantial detail by industry sector.For balance of payments, detail is available for 40 major categories of merchandiseexports and imports as well as 13 major sectors of the services industry. Virtually all ofthis available information was revelatory with respect to Bermuda, summarizing tradein insurance, shipping, investment funds, and professional services. All of thisinformation that is generally summarized in Chapter 2 on trade provided evidence thatthe U.S. economic relationship with Bermuda was large and substantial.Nevertheless, an economic relationship has to be more than large to be impactful. To asignificant degree, the study relied on compilations of U.S. and Bermudian privateindustry sector data to assess how Bermuda economic entities operated in the UnitedStates and why the United States relied on Bermuda rather than another country or onU.S. domestic resources. Where available we chose detailed industry data that BEAitself relied upon. Therefore there was some conceptual similarity in estimates, forexample net written insurance premiums at the government level were compiled fromthe sources we used from the private sector.Methodologies for Estimating What is Not Published by the U.S. CommerceDepartment and Official Statistics prepared by other national government statisticalagencies.Foreign Direct Investment (FDI) Foreign direct investment is a widely available statisticbased on definitions and guides and methodologies agreed to by the United Nationsand the International Monetary Fund. All countries follow these methods and theresulting data is highly comparable. Almost every country collects information aboutthe flow of productive investment into and out of their country. FDI is an importantpart of predicting and explaining economic growth and changes in economicdevelopment. For the macro-prudential regulator, sudden, volatile flows in foreigndirect investment can undermine a country’s economic stability, disrupting exchangesrates, interest rates and price levels.That said, the globalization of the world economy and the relative increase of privateequity and hedge fund presence in international investment patterns have underminedstatistical reporting for foreign direct investment. Generally direct investment forcountry like the UK and the United States is pretty straightforward. A UKmultinational decides to invest in the United States by a merger or an acquisition andthen build equity over time directly. For some countries like the United Statesinvestment has become a little more complicated over time. Today about have the timea US company makes international investments through an offshore holding company.This is also true of China, the Netherlands and UK and Ireland. This has the merit ofTransnational Analytics LLC 40 Washington DC
  • 41. Business Bermuda September 2012allowing the investor to choose a stable legal framework for investment, administrativecosts are kept under control and disposal of the merger in the future is easier. Theresult is that the ultimate beneficial owner of the holding company may not have thesame nationality as the holding company investing in a third country. An example ofthis is the experience of Bermuda investment in the United States. In 2010, the UnitedStates reported that Bermuda domiciled holding companies was responsible for $5billion of inward investment into the United States. However, when the United Statesrecalculated how much investment came from Bermuda where the ultimate beneficialowner of holding companies located in the Caribbean was Bermuda, the investmentinto the United States increased to $55 billion.Employment. In Chapter 2, this study describes the employment associated with U.S.exports of merchandise goods exports to Bermuda. In the same chapter, employmentestimates are made related to cross-border services exports from the United States toBermuda. The methodology for relating total industry employment to U.S. exports toBermuda is based on information developed by the U.S. Department of Commerce,International Trade Administration, Office of Trade and Industry Information, (OTII)and the U.S. Bureau of the Census with the Bureau of Economic Analysis and theBureau of Labor Statistics. Every year, the OTII estimates and publishes total jobs forU.S. manufactured exports associated with the NAICS Industry Codes. The most recentdata available on this subject is 2007. But Albright Stonebridge economists undertook tocompile employment data from public company sources for all US affiliated companiesin Bermuda for 2009.In this study we estimated exports of goods by NAICS industry sector for 2008 andservices exports from Department of Commerce data. We then used the overall U.S.manufacturing export and employment relationships summarized in the OTII data baseand using ratios derived from this of employment associated with a 2010 dollar of U.S.exports by industry, estimated the jobs associated with the direct and indirectmanufactured exports to Bermuda.The study also sought to estimate the U.S. jobs associated with international goodsservices transactions carried out by U.S. subsidiaries of Bermuda domiciled companies.This data is estimated by annual surveys carried out by the U.S. government of foreigndirect investment in the United States. The most recent estimate was for 2009 with somemore recent data for 2010. The methodology for these estimates is published in “U.S.Affiliates of Foreign Companies: Operations in 2009,” Survey of Current Business, byThomas Anderson, U.S. Bureau of Economic Analysis, August 2011.Transnational Analytics LLC 41 Washington DC
  • 42. Business Bermuda September 2012APPENDIX B: References and SourcesBermuda Monetary Authority, Regulatory Update, July 2011. Hamilton, Bermuda.Briegel, Fabian, Country Report, Bermuda, Rabobank Economic Research Department,May 2011.Desai, Mihar, A. and Hines, James R. Expectations and Expatriations: Tracing theCauses and Consequences of Corporate Inversions, June 2002.Dewitte, Dirk, Deloitte Tax Notes International, The Use of Various Jurisdictions forInvestment in China, August 2010.Dorfmueller, Pia, Tax Planning for U.S. MNCs with EU Holding Companies. KluwerLaw International. The Hague. 2003Economist Intelligence Unit, Bermuda, Country Report, July 2011, London UnitedKingdomFroot, Kenneth A. “Lessons from the Current Financial Crisis from CatastropheReinsurance.” May 2009, Harvard Business School, Boston, Massachusetts.Gonzalez, Maria and Alfred Schipke, “Bankers on the Beach,” Finance andDevelopment, IMF, Washington DC, June 2011.Gopalan, Sasidaran and Rajan, Ramkishen S.; India’s Foreign Direct Investment Flows,Trying to Make Sense of the Numbers. Institute of South Asian Studies, Singapore, July2009.Hartwig, Robert P., Insurance Information Institute, Financial and Market Impacts ofHurricanes on Property and Casualty Insurers, April 2005Government of Bermuda, Department of Maritime Administration, History of theBermuda Registry of Shipping. St Georges, Bermuda 2009.Transnational Analytics LLC 42 Washington DC
  • 43. Business Bermuda September 2012Government of Bermuda, Department of Maritime Administration, Data Base StatsShips. St Georges, Bermuda 2009.Government of Bermuda, Ministry of Finance, National Economic Report of Bermuda,2010 February 2011.Government of Bermuda, Cabinet Office, Department of Statistics. “Q4 2010Highlights.” Quarterly Bulletin of Statistics, Hamilton, BermudaGovernment of Bermuda, The Cabinet Office, Department of Statistics, Gross DomesticProduct, by Industry, 2009 Highlights, Hamilton, Bermuda, December 2010.Government of Germany, Statistisches Bundesamt, Deutsche Bundesbank, Balance ofPayments Statistics, December 2011, Frankfurt am Main, Germany, December 2011.Government of India, Reserve Bank of India (RBI), Developments In India’s Balance ofPayments during Fourth Quarter of 2011-2012.Government of Ireland, Central Statistical Office, Foreign Direct Investment- 2010,September 23 2011.Government of People’s Republic of China, Hong Kong SAD, Census and StatisticsDepartment, Report on Hong Kong Trade in Services Statistics for 2010. Hong KongChina February 2012.Government of Singapore, Department of Statistics, Singapore’s International Trade inServices, 2009.Government of Switzerland, Swiss national Bank, Swiss Trade in Services with ForeignCountries. Zurich, February 2010.Government of the United Kingdom, Office of National Statistics, Rachel Birt & HelenDinsdale, International Trade in Services 2010. London, England. March 2012.Hong Kong Exchange, Fact Book, 2010. “List of Listed Companies on Main Board.”Honk Kong. 2011.Insurance Information Institute, A Firm Foundation: How Insurance Supports the U.S.Economy. New York, New York, 2009.Transnational Analytics LLC 43 Washington DC
  • 44. Business Bermuda September 2012Insurance Information Institute, Catastrophes: U.S., New York, New York, undated.International Monetary Fund, Coordinated Direct Investment Survey, June 13, 2012,Bermuda; China, Mainland; China, Hong Kong; France; Germany; India; Ireland;Luxembourg; Netherlands; Singapore; Switzerland; Republic of China, Taiwan; UnitedKingdom; United States. Washington DC.Milligan-Whyte, John. Creating Global Joint Ventures with China’s Emerging MegaMultinational Corporations. Bermuda Chamber of Commerce, 2007Organization of Economic Cooperation and Development (OECD), EBOPS 2010, TradeIn Services By Partner Country. Paris, France 2012.Owens, Jeffrey, Written Testimony Before the Senate Finance Committee on OffshoreTaxation, May 3 2007, Washington DCReinsurance Association of America, Reinsurance Underwriting Report, StatutoryResults, RAA website, www.reinsurance.org, December 31, 2010Reinsurance Association of America, Offshore Reinsurance in the U.S. Market: 2010Data, September 2011. Washington DC.Rose, Andrew K, and Mark Spiegel. “Offshore Financial Centers, Parasites orSymbiants”, Economic Journal, Vol 117 No 523, pp 1310-35. 2007.Sullivan, Martin A. and Lee A. Sheppard, Offshore Explorations: Caribbean HedgeFunds, Part2, Tax Analysts, Washington DC January 2008.Sun, Sean. What You Need to Know about Chinese Stocks. Rising Star Portfolio Series,www.fool.com. November 2010.U.S. Department of Commerce, U.S. Bureau of Census and International TradeAdministration, Total Jobs Supported by Manufactured Exports, 2007. Washington, DC2010.U.S. Bureau of Census, U.S. Exports to and Imports from Bermuda, 2003 to 2010.Washington DC. 2011U.S. Bureau of Economic Analysis, Thomas Anderson. “U.S. Affiliates of foreignCompanies” Survey of Current Business, August 2011 pages 211-226. Washington DCTransnational Analytics LLC 44 Washington DC
  • 45. Business Bermuda September 2012U.S. Bureau of Economic Analysis, Kevin Barefoot and Raymond Mataloni Jr. “U.S.Multinational Companies: Operations in the United States and Abroad in 2008” Surveyof Current Business, August 2010, pages 205-230. Washington DCU.S. Bureau of Economic Analysis, Koncz and Flatness. “U.S. International Services:Cross Border Trade in 2007 and Services Supplied Through Affiliates in 2006” Survey ofCurrent Business, October, 2008, pages 16-62. Washington DCU.S. Bureau of Economic Analysis, Jennifer Koncz-Bruner and Anne Flatness. “U.S.International Services: Cross Border Trade in 2008 and Services Supplied ThroughAffiliates in 2007” Survey of Current Business, October, 2009, pages 22-64. WashingtonDC.U.S. Bureau of Economic Analysis, Jennifer Koncz-Bruner and Anne Flatness. “U.S.International Services: Cross Border Trade in 2009 and Services Supplied ThroughAffiliates in 2008” Survey of Current Business, October, 2010, pages 18-60. WashingtonDC.U.S. Bureau of Economic Analysis, Jennifer Koncz-Bruner and Anne Flatness. “U.S.International Services: Cross Border Trade in 2010 and Services Supplied ThroughAffiliates in 2009” Survey of Current Business, October, 2011, pages 13-56. WashingtonDC.U.S. Joint Committee on Taxation, Staff Report. Present Law and Analysis Relating tothe Tax Treatment of Reinsurance Transactions between Affiliated Entities. July 12,2010, U.S. Congress. Washington DC.U.S. Treasury Department, Treasury International Capital System Statistical Report,August and April 2012. Office of International Affairs, Washington DC.Transnational Analytics LLC 45 Washington DC

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