The Bermuda News Nexus-April-2012


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The Bermuda News Nexus-April-2012

  1. 1. NEXUS THE BUSINESS BERMUDA April 2012In This IssueMessage fromthe CEOBerMUDA: one of theworld’s premieroffshore financialcentresbusiness friendlybermudabermuda and chinastrengthen tiesthrough goodcommunicationswhy bermudais ahead of thecompliance curveBermuda seizestakaful opportunitybusiness bermudaevent summaryBermuda’s ilsresurgencethe bermudacorporate games PROFESSIONAL COMMENTARY FROM BUSINESS BERMUDA 1
  2. 2. BUSINESS | Professional Commentary from Business BermudaMESSAGE FROM THE CEOcheryl packwood Bermuda forging with a 24-hour functioning electronic trading platform that hasCEO, business bermuda been at the forefront of developing innovative capital markets ahead amid a changing products like insurance-linked securities. The leadership of international business Greg Wojciechowski, CEO of the BSX, was key to the success of environment this transaction and so was the recognition of the importance of an offshore trading platform and exchange that can further advance the capital markets and the next generation of capital As we end the first quarter markets, products and services. of 2012, Business Bermuda These are just a few of the many stories of growth and success has continued an enthusiastic that come as a result of the hard work of our service providers, campaign of marketing business executives, and government officials, but they are also indicative of a brand – BERMUDA – that means something activities and efforts that are positive in international business.focused on delivering the message that Bermuda is It is often hard to measure the impact of brand on the decision-ready and open for business. making process of executives in international business, but theThere is often discussion about the efforts of Business good news about Bermuda can be seen in progress like this –Bermuda to generate interest and drive the growth of even amid a still challenging world economic business in the jurisdiction. With limited The legendary American social commentator and entertainerfinancial and human resources compared to competing Will Rogers said, “Even if you are on the right track, you’ll getjurisdictions, we have worked to cultivate the Bermuda brand run over if you just sit there.”through media relations, direct one-to-one marketing trips,participation in conferences, and active engagement to build, The difficult part of brand building is often times hearing moreshape, and enhance the reputation and services that Bermuda challenging feedback. And so, while we actively seek businessoffers the world. on marketing trips and in meetings around the globe, we are also listening for the signs that we have work to do.The Bermuda brand is one that stands for innovation,excellence, and effectiveness in developing the financial There is little doubt that Bermuda does have work to do inservices that enhance the free flow of capital around the world. key sectors particularly in attracting funds to both registerWe see this in the many real examples of the businesses that and physically domicile in Bermuda. There are many groupsare domiciled and operating in Bermuda. working in Bermuda to examine these challenges and Business Bermuda is an active part of those discussions offering ourSo, it should come as no surprise that when one of the world’s insights, experience, and perspective.leading hedge funds sought a jurisdiction for the creation ofa reinsurance company that would insure risks from around In fact, we have been on marketing trips to New York andthe world, it did so in Bermuda. To quote from a Royal Gazette Washington, DC twice in February and March. The goals ofarticle on Third Point Re, the company’s CEO John Berger said, these meetings were threefold:“There are many great advantages to Bermuda. It’s a very civilplace with an established infrastructure and banking industry. • Establish and build a personal relationship and point ofThe BMA is a very respected regulator and good to deal with. contact with the commercial attachés and lawyers;Bermuda’s proximity to the US is also helpful, and it’s not farfrom London. But overall, most importantly Bermuda is really a • Listen, learn, and understand the key forces in the market thatreinsurance centre.” (Royal Gazette, Third Point Re CEO: ‘There are driving business decisions so that Bermuda’s marketingare many great advantages to Bermuda’, January 27, 2012) efforts can be more effective;Further to that point, when the TMX Group, owners of the • Provide information/background on Bermuda’s internationalToronto Stock Exchange, looked for growth opportunities, they business community (regulatory/actual) and offer several ideasmade a strategic investment in the Bermuda Stock Exchange, a for immediate cooperation.fully-regulated, world renowned and respected stock exchange2
  3. 3. Working in partnership with Pam Burrows from the Ministry Beijing. Our presence there builds on efforts from more than aof Finance, Business Bermuda conducted a set of marketing year ago in Hong Kong where we met with representatives ofmeetings with key sources of international business. The the China Council for the Promotion of International Trade. Inmeetings have included: Beijing, we have secured a high profile speaking opportunity for the Honorable Wayne Furbert, JP, MP, Minister of Business• Michael Tannenbaum, Partner, Development and Tourism, who will talk to attendees at the Tannenbaum Helpern Syracuse & Hirschtritt, LLP Chinese Enterprises Outbound Investment Conference. Working• Mexican Consulate with me, he will discuss Bermuda’s attractiveness as an international business jurisdiction and focus specifically on• Brazilian Consulate some of the opportunities for Chinese investment in key tourism• Turkish Consulate and infrastructure development projects in Bermuda.• Canadian Consulate In addition, we will be in London for the Annual Bermuda• Kenyan Embassy Financial Services Conference, which will enable us to reconnect with our traditional business partners and continue• United Arab Emirates Embassy to deliver the message on Bermuda’s products and services.• Vietnamese Embassy Business Bermuda is delivering on the investment and• Indian Consulate resources of government and its members to build the Bermuda• Australian Consulate brand and create an environment that will allow our service• Patrick Sweeny, Partner, providers and international business partners to further Herrick Feinstein LLP grow and develop. We thank all of them, and you, for your ongoing support for Business Bermuda and your interest in• Peter Driscoll, Partner, international business in Bermuda. Orrick, Herrington & Sutcliffe LLPThese meetings have led to powerful insights, broadened Together we are accomplishing much, and we have more to doopportunities and direct interest in closer, cross-border in the months ahead. •business relationships. In addition, they have allowed forBusiness Bermuda to open the door to greater dialogue andopportunities for its service providers in international businessand our government.As you read this newsletter, we will be in China with theMinistry of Business Development and Tourism meeting withkey leaders of government and business in Shanghai and 3
  4. 4. BerMUDA: one of the world’spremier offshore financial centresPETER HUGHES Bermuda’s credibility and within Switzerland, whilst Cayman which also does not taxApex fund services profits, income, dividends or capital gains does however levy international recognition annual work permit fees of approximately two to three times is a result of its long that of Bermuda’s payroll tax. Finally, the United Kingdom established reputation charges 28% capital gains tax and 40% - 50% income tax. founded on the quality rather Location than quantity of the financial Bermuda is conveniently located in the Mid-Atlantic between transactions that the United States and Europe, approximately 600 miles directly east of North Carolina. Bermuda enjoys easy access originate there. to many Eastern North American cities such as New York, Boston, Atlanta, Toronto, Washington D.C., Philadelphia The Island has long been regarded and Miami as well as numerous direct flights to London. as an exceptionally well-regulated Accessibility to these gateway cities makes Bermuda an ideal jurisdiction largely as a consequence place for an international company to be domiciled as it isof the oversight of the Bermuda Monetary Authority (“BMA”) critical to be able to have those all-important face-to-facewhich screens those individuals who wish to do business Board meetings, which allows companies to derive maximumfrom or within the Island. benefit from the Island’s tax regime as well as minimizing adverse tax liabilities in the United States and the UnitedAs a leading offshore centre, Bermuda has all the essential Kingdom.components necessary for a robust international businesscommunity. Some of the many advantages of doing business In addition, the Island’s time zone is four hours behind GMTin Bermuda include its progressive regulation regime, and one hour ahead of US East Coast time which makes itlower tax jurisdiction, its location, the wide availability of a convenient location from which to conduct business withexperienced service providers and the quality of life that is those customers, colleagues, partners and suppliers that areenjoyed on the Island. based abroad.Progressive RegulationThe BMA has sole responsibility for the regulation, Experienced Service Providerssupervision and inspection of financial institutions operating One of Bermuda’s strongest points is the wealth of expertisein or from within the jurisdiction. The BMA has developed that is available from a wide range of experienced servicea risk-based approach when supervising these financial providers that are either home-grown, or have beeninstitutions which allows them to concentrate their resources attracted to its shores from overseas. These high-caliberon those firms which pose the greatest risk. service providers which include, but are not limited to, legal, fund administration, banking, auditors, insuranceThe BMA uses a common, core set of supervisory tools and telecommunication/technology/e-commerce offeracross all sectors of the business community for purposes international companies the depth and breadth of highly-of risk assessment. These tools include identifying risk skilled professionals needed to carry out complex businessimpact groups and prioritization, fundamental monitoring, transactions on a global visits, risk assessment models and enhancedmonitoring via on-site programs. This risk-based approach In addition, the Island has a legal system founded on Englishhas been endorsed by the International Monetary Fund as Law, a well-educated, literate population two-thirds of whomwell as a number of varied international regulatory and are of working age, and it enjoys one of the world’s higheststandard setting bodies. per capita incomes. As a consequence, the Island is able to not only attract but also retain talented professionals of thetax efficient Jurisdiction highest quality.As a tax-neutral jurisdiction, Bermuda does not taxprofits, income, dividends or capital gains. Profits can be Apex’s long term commitment to Bermudaaccumulated, and there is no obligation or requirement to pay Bermuda was Apex’s first office nearly eight years ago anddividends. In fact, Bermuda’s only corporate-related tax is in since then the Bermuda office has been the spring board forthe form of payroll tax, which is paid on all employees within the Company’s expansion into 20 other jurisdictions arounda company at a maximum rate of 16%. the world.This is lower than, or equivalent to, most other competing This growth is very much at the heart of Apex’s philosophyjurisdictions. By comparison, Switzerland’s corporate tax rate of providing personalized fund administration services bycurrently ranges from 11.8% to 24.2%, depending on location4
  5. 5. being based in the same location as our clients. This enables Conclusionus to build working relationships with our clients so we can Bermuda’s reputation as the leading offshore businessproperly understand their businesses, their local regulatory jurisdiction is a result of having the aptitude to provideframeworks and help them grow business solutions in many areastheir businesses. ...Bermuda’s only corporate-related tax of international business including; fund administration, insuranceWith the regulatory system is in the form of payroll tax, which is and reinsurance, banking andcontinuing to tighten, the Apex paid on all employees within a company network, which originated at a maximum rate of Bermuda, is increasingly Having a sound regulatorydemonstrating its strength. approach and a mature businessFund managers can benefit This is lower than, or equivalent to, infrastructure, Bermuda has beenfrom an increasing level of risk able to distinguish itself from othermanagement services as well most other competing jurisdictions. By competing jurisdictions as well asas services that provide greater comparison, Switzerland’s corporate tax secure its premiere position in theefficiencies. Two examples of these eyes of the international businessproducts recently launched by rate currently ranges from 11.8% to 24.2%, community. All of this allowsApex include Apex Funds depending on location within Switzerland, for a streamlined process when247 and AFOS. establishing or incorporating a whilst Cayman which also does not tax business on the Island. •For Bermuda to remain profits, income, dividends or capital gainscompetitive, other service does however levy annual work permit feesproviders located in Bermudaalso need to increase the range of of approximately two to three times that ofservices they provide and critically Bermuda’s payroll tax.continue to invest in new technologies. 5
  6. 6. Business friendly bermudaThere is an emerging trend among private international business sector; a safe environment; easy access via North American and European gateways; tax efficiencies;equity (PE) asset managers. More and more deep pools of talent; and, regular visits by high-calibrePE asset managers are carefully evaluating investors, professionals and business leaders.their global corporate structures in search Regular dialogue between Bermuda’s international businessof ways to optimise their operations and growth community and government encourages regulations that arepotential. The choice of where to do business is innovative, while preserving the highest standards of important, inevitable decision that all PE asset This approach to regulation accommodates a variety of structures for both hedge fund and PE products, and for assetmanagers must face when looking to build an managers themselves, including Bermuda segregated accounteffective global corporate structure. companies.When selecting a jurisdiction, PE asset managers have three Bermuda’s asset management industry is regulated by themain considerations: a location in which investors have Bermuda Monetary Authority (BMA), with legislation thatconfidence and will facilitate access to capital; a location provides a statutory basis for regulating the establishmentproviding the most appropriate structures and vehicles, and operation of funds and certain asset managers. The BMA’ssuitable for both investors and investment strategies; and, regulation also provides for the licensing and supervision ofa location effective and efficient for PE asset managers do Bermuda fund administrators. The regulations themselves areto business from, for both personal and business reasons. designed to be commensurate with risk investment productsA number of must-have qualities vault to the top of the list: with exposures only to institutional or sophisticated investors,reputation; access to global capital; effective regulatory who rely less on a public regulator, enjoy a significantly lowerenvironment; efficient tax regime; strong infrastructure and regulatory burden than retail investment offerings.stable government; and, available talent. Bermuda has an extraordinary concentration of intellectualBermuda is the offshore financial centre of excellence with capital, with administrators, lawyers, audit and taxthe most convenient location to service US, European and professionals and independent directors with a history ofLatin American markets. Bermuda’s tax efficiencies create an dealing with international structures and complex products.opportunity for the establishment of global fund platforms Their experience working with emerging markets can provideand locally based asset management and advisory functions, a high level of customised service. Bermuda’s deep pools ofenhancing the ability to attract capital on a global basis. Not intellectual resources and trusted regulatory framework haveonly a domicile of choice for offshore structures, Bermuda also contributed to its emergence as a domicile fit for purpose.plays an important role in facilitating capital-raising activities Bermuda also has a pool of internationally experienced non-and cross-border investments. executive directors that can provide ‘mind’ and management, evidence of substance of activities, and independent andMore and more investment professionals are interested in objective oversight.relocating to Bermuda to take advantage of: political andeconomic stability; an avowedly business-friendly government Bermuda maintains a significant number of administrationthat understands the importance of a well-regulated firms with skill sets spanning the hedge and PE markets,6
  7. 7. in addition to supporting family offices. These firms service jurisdictions. The firm has a dedicated asset managementBermuda-domiciled entities, as well as many entities domiciled practice with extensive audit, tax and advisory expertise andin other jurisdictions. Bermuda is emerging as a strong choice draws on international tax and transaction services know-howfor PE houses, as these teams look to provide options and from the global PwC Network. We can work with your existingopportunities for their business and their people; in addition, business advisers to provide you with the best advice, makeit remains a jurisdiction strong in servicing the hedge fund introductions to quality service providers, and can arrangeindustry, with boutique administrators for you to meet with the BMAproviding highly customised, personal and government officials. Ourservice in well-controlled environments. Bermuda maintains a significant number executive search and selection of administration firms with skill sets professionals can assist you toAsset managers also choose Bermuda find the right talent on Island orfor their key operations because it spanning the hedge and PE markets, elsewhere.offers one of the world’s highest in addition to supporting family offices.standards of living and provides an These firms service Bermuda-domiciled Bermuda has a long historyefficient tax structure, both corporate of providing the qualities soand personal. Bermuda-exempted entities, as well as many entities critical to building an effectiveentities are provided a period of tax domiciled in other jurisdictions. Bermuda global business structure.assurance to March 2035, under the Bermuda’s geographic locationExempted Undertakings Tax Protection is emerging as a strong choice for PE houses, positions the Island as aAmendment Act 2011, such that certain as these teams look to provide options and financial hub with convenienttaxes would not, if introduced, be access to global capital.imposed on these entities. opportunities for their business and their The regulatory environment people; in addition, it remains a jurisdiction promotes innovation andMaking the choice to operate your asset flexibility at the appropriate strong in servicing the hedge fund industry,management business in Bermuda is level of oversight. The taxa critical first step; setting up your with boutique administrators providing regime is efficient and beneficialoperations in an efficient and effective highly customised, personal service in well- for both corporations andmanner will enable you to gain the individuals. And the governmentbenefits that Bermuda offers. PwC controlled environments. is committed to the growthcan advise you on how to set up and and expansion of the assetposition your business to gain those management industry. For allbenefits. PwC Bermuda, as a leader in the asset management of the above reasons, Bermuda has become a recognised andmarket, has been servicing asset management clients for sophisticated jurisdiction for asset managers and a servicingover 40 years including some of the largest asset managers centre for many PE funds. •and funds domiciled and administered in Bermuda and other 7
  8. 8. BERMUDA AND CHINA STRENGTHEN TIESTHROUGH GOOD COMMUNICATIONSBACKGROUND OF BERMUDA-CHINA TIES 1. “Foreign investment is welcomed in modern On December 2, 2010, Bermuda and the People’s Republic of agriculture, high-tech and environmentChina signed a TIEA (Tax Information Exchange Agreement). At protection industries;”the signing, Bermuda’s Premier The Hon. Paula Cox, JP, MP and 2. “Encourage qualified enterprises to list on stock Wang Li, the Deputy Commissioner of the State Administration markets; In-depth reform in monopoly industries for of Tax, both commented that the agreement represented ‘a easier market entry and more competition”significant step forward in cementing ties between Bermudaand the PRC’. In addition to the business initiatives of the FYP, during the recent NPC meetings in March 2012, State Council PremierNews of the agreement won significant media attention in Wen Jiabao explicitly stated in the Report on the Work ofChina. Leading business papers Economic Observer, China the Government that “structural tax reduction” will be takenBusiness, Shanghai Business, and China Business Times as one of the important jobs this year. There is now a muchcovered the story. In addition, all major online portals more relaxed public opinion on tax efficiency in China: a greatincluding Sina, Sohu, and Tencent gave the news opportunity for Bermuda in China.significant attention. As China looks to finance its continued growth, jurisdictionsBermuda’s ties with China continue to deepen. There are now like Bermuda offer clear advantages to support this growth.over 700 entities with Chinese interests registered in Bermuda.The signing of the TIEA and subsequent media coverage THE OPPORTUNITYhighlight Bermuda as a premier jurisdiction for Chinese Overseas listings – There is a great increase in the number ofbusiness interests that also has the stamp of approval from Chinese companies listing overseas as well as internationalrelevant Chinese authorities. While any new partnership has companies listing in Hong Kong as a platform for the mainlandits challenges, there remains a wealth of opportunity available Chinese market. Offshore jurisdictions, such as Bermuda, arefor both Bermuda and China through deepening this mutually the traditional choice for incorporation purposes.beneficial relationship. Domicile for funds – Bermuda offers an excellent environmentCHINA – THE POLITICAL CONTEXT for China-focussed investment funds.China’s 12th Five Year Plan (2011-2015) was approved by theNational People’s Congress (NPC) on 14 March 2011 with the Private equity – China’s High Net-Worth Individuals (HNWIs)goals of creating an environment for more sustainable growth need more sophisticated and secure ways to manage andby prioritizing more equitable wealth distribution, increased protect their wealth, an area of expertise in Bermuda.domestic consumption, and improved social infrastructure.The Plan shows a major change in the thinking of the Chinese (Re) insurance – China’s re-insurance industry isleadership. China is moving from an export-based economy underdeveloped, yet, it is a country that suffers major naturalto an investment-led, value-added service-based model that disasters every year. It currently does not spread its riskbuilds its domestic consumption as China’s overall efficiently resulting in wasted capital that could be used forwealth increases. other purposes. Bermuda’s highly developed (re) insurance market can serve to fill this gap.CHINESE WEALTHOne of the major challenges that China’s leadership faces is THE COMMUNICATIONS CHALLENGEthe uneven distribution of wealth across China’s population. Despite the major opportunity for Bermuda, there exists aAccording to the World Bank, over 15% of China’s population communications challenge.lives on $1.25 a day equalling around 200 million people, with21.5 million people in absolute poverty (less than $90 a year). Interviews with senior Chinese government officials andIn contrast, according to the Hurun Rich List published in business leaders show that the perception of BermudaSeptember 2011, China is now second in terms of having the as an offshore jurisdiction is understood, but the specificmost dollar billionaires (271) in the world, proceeded only by strengths, products, and services are not known. Also, there isthe US (400). China also boasts over one million millionaires. a generally negative perception of Bermuda and other offshoreThe World Luxury Association’s official report on 2012 shows jurisdictions due to a lack of information.that China has become the world’s largest consumer of luxurygoods. The report predicts that total consumption of luxury In comparison to other offshore jurisdictions Bermuda’sgoods is expected to reach 59 billion Euros – a record high. level of activity in China is relatively low. This means other jurisdictions with a strong marketing effort in the region areCHINESE BUSINESS gaining more business-generating visibility than Bermuda.The 12th Five Year Plan (FYP) highlights two significantopportunities for Bermuda through the introduction ofbusiness-focussed initiatives:8
  9. 9. RECOMMENDED ACTIONSGiven Bermuda’s strengths in financial services, re-insurance inparticular, and for supporting overseas listings and funds, it isclear these advantages need to be communicated more clearlyto the Chinese market. The approach should be ‘quality overquantity’ where Bermuda communicates its message to keydecision makers in China.In April 2012, Bermuda’s Minister for Tourism and BusinessDevelopment, The Hon. Wayne Furbert, and Business BermudaChief Executive Officer, Cheryl Packwood, led a businessdelegation to Shanghai and Beijing. The visit to both citiesconsisted of holding meetings with representatives of China’sgovernment and business leaders to seek advice from people onthe ground on how Bermuda can build on its success to date inChina.Media briefing sessions were held to communicate Bermuda’sstrengths to the Chinese press and raise the level ofunderstanding of Bermuda’s advantages over other jurisdictions.Bermuda and the PRC will continue to work together as ViceChairs of the OECD Global Forum Steering Group and to buildand strengthen commercial ties. For Bermuda to gain a clearcompetitive edge, the Annual China Financial Services RoadShow serves as a platform for Bermuda to learn more about theChinese marketplace, establish the appropriate relationships,and quantify Bermuda’s stellar reputation in an effort to furthercement its global leadership role as the premier jurisdiction forChinese business. • 9
  10. 10. why bermuda is aheadof the compliance curveWith the EU’s AIFM directive set to come into That is why we have levels of disclosure that put us on the OECD white list; why, unlike others, we’ve never beenforce soon, it may come as a surprise to some sanctioned for failing to uphold these standards; and, why,people that Bermuda is already in position unlike any other offshore jurisdiction, we are Vice Chair ofto meet those standards. But for those who know the steering committee of the OECD’s Global Forum. In our opinion, being an offshore jurisdiction should not be anus better, it is business as usual. Because meeting excuse for failing to meet the standards that people rightlyinternational standards of regulation is not something expect. So making sure that we meet the requirement for a newwe do reluctantly - it is at the heart of who we are. international directive is not something we are forced into doing – it is the sort of thing we thrive on.To build a successful financial centre, we need to provide whatthe top fund managers need when they are choosing their Of course, we know that a secure business environment meansdestination. And, when we talk to these people, we find that more than just good regulation. Bermudian law is based oninternational-standard regulation is always towards the top English Common Law – so, we are in a system that is usedof their list. Media caricatures may suggest that financiers across the world and that has been tried and tested overwant to be given a regulation-free environment, but the best centuries. It is familiar, transparent and fair; it means thatpeople want to compete on a level playing field, not in a system people can invest with confidence, knowing that they will notthat lets the unscrupulous get ahead. And, they want to know be vulnerable to the whims of an unpredictable legal system.that there is a stable environment they can rely on so that the And, if and when disputes arise, a simple arbitration process isbusiness they build today will not be blown away by hurried easily available to iron out any issues fairly and efficiently.regulation tomorrow. When it comes to attracting business, wecut costs - not corners. But while we are tough on wrong-doers, we are not the sort of jurisdiction that imposes arbitrary rules. The BermudaThe cornerstones of Bermuda’s financial services industry Monetary Authority has long held a policy of working closelyare regulation and rule of law. Bermuda is a well regulated, with the firms it regulates. Potential problems can be spottedtransparent and compliant destination. To attract people away more easily, because we know the people involved, but it alsofrom international financial centres in cities like London and means that they will always consult with the people who willNew York, we need to offer a location that people can trust to be affected before regulations are implemented. As a result, theoffer the same security for their assets. regulations work in practice, not just in theory, and rather than10
  11. 11. coming out of the blue, they are adopted in a way that means have all the other people you need if your business is goingyou can adapt in advance. to succeed. All the big four accountancy and auditing firms and number one offshore law firms have made their home inWhile we provide a stable environment in which to invest, we Bermuda. These are just some of the businesses who help toalso strive to make the system work in other ways. Working keep things running Bermuda does not come with the burden of excessive costs.We have a tax neutral environment in which international We have a wide range of well-trained professionals throughoutbusinesses can operate effectively and efficiently. Keeping costs the financial services industry. This not only means that youdown never goes out of fashion, but in a world where high have a strong pool of talent to draw on, it also means thatpublic debt is increasing the pressure on large economies to we have the capability to go beyond standard products andraise taxes and hostility towards the finance industry is making operations. Because of the people who live and work here,conditions more difficult, it becomes even more important to Bermuda offers access to, for example, the internationalbe able to keep more of the business’ profits for the business to reinsurance market and niche investment funds. Indeed, 75create jobs at home. percent of the Fortune 100 are domiciled in Bermuda.Importantly, our infrastructure is world-class. In the modern In order to attract international financiers, we offer aworld, business is regularly conducted across borders and a jurisdiction that matches international standards step forfund manager needs to monitor his investments in London, step. That is true whether those standards are the qualityLisbon and Lahore. In this world, what matters is less where of regulation you expect, stability and the rule of law, oryou are on the globe and more how easily you can connect to the infrastructure and personnel. We do this in a way that keepsrest of it. So, we have focused on providing the connectivity and your costs down and lets you keep more of the money that youthe technology you need in order to conduct business anywhere earn. In Bermuda, you can have European levels of regulationin the world. and stability without European levels of bureaucracy and cost. In a world where doing business is tough, we are working hardWe have some great people in Bermuda. Of course, a centre to make your job easier. •like ours is always going to have great fund managers andservice providers, people who are among the best in the worldat making your money work harder and go further. But we also 11
  12. 12. Bermuda seizes takaful opportunityIt is not by accident that Bermuda has grown The next logical step is to achieve the same central role in takaful. We are not deterred by the fact that the globalinto the world’s largest insurance and downturn slowed the growth of takaful just as it hit everyreinsurance centre. The Island is constantly aspect of the insurance industry. The evidence still suggests that, overwhelmingly, takaful is set to continue as the fastestalert to changes in the organisation of global accelerating area of insurance in the that may have implications for howcompanies choose to organise their insurance This takaful trend now applies to Western economies as well as Islamic jurisdictions. One element of takaful, and indeed ofrequirements. As a result, Bermuda has the world’s Islamic finance in general, that has growing appeal in the Westmost supportive legal and regulatory framework, is its powerful ethical component at a time when conventional international finance is not always seen in a strongly ethicalan established captive insurance and reinsurance light. The principle of sharing risk and reward has widemarket and all the support professions and services appeal, as does the fact that Islamic finance nowadays has become just as efficient as its more elderly rivals.that a business may need. Not long ago Islamic finance was too small a componentAlready Bermuda’s Islamic finance sector is large and growing of the global market to attract much attention. Its newfast. And its working partnerships with Middle East financial professionalism and phenomenal growth have happened socentres such as Bahrain have been diligently fostered, in order fast that global awareness has not kept up with the develop synergies and mutually beneficial deals. Thus This international veil of ignorance will soon be swept away asBermuda was a prominent participant in the 18th Annual more people realise we are talking about what is now a trillionWorld Islamic Banking Conference held in Bahrain. So it is no dollar industry – as large as the entire economy of a globalsurprise that Bermuda has invested resources and expertise giant such as India and still growing at way above industryin providing a highly supportive framework for the takaful speed. Analysts at PwC expect the market to double in the nextand retakaful industry. Bermuda now can fairly claim to have five years to an eye watering two trillion class accounting, banking, legal, e-business, trust andmanagement services for Shariah compliant institutions. Bermuda is well placed to take advantage, not least in takaful and retakaful. We signed in 2010 a double taxation agreementThis has enabled Bermuda to become an increasingly trusted with the Kingdom of Bahrain which has opened up structuraljurisdiction for structured financial transactions, such as opportunities for both conventional and Shariah compliantsukuk and Shariah compliant funds, including private equity investors eager to access the oil and gas rich nations of thefunds. The Island has, for example, become a world pace setter Gulf Cooperation Council (GCC), which is itself now a trillionfor sukuk issuance for aircraft financing. dollar market.12
  13. 13. INTERNATIONALCALENDARof eventsApril 2012April 24 [Mandarin Oriental, London]Annual Bermuda Financial Services ConferenceApril 25-26 [Paris]Eurohedge Investment SummitMay 2012May 14-16 [The Ritz-Carlton, Grand Cayman]STEP CC12 Caribbean ConferenceMay 22-24 [Suntec, Singapore]Shorex Wealth Management Forum SingaporeMay 24 [Singapore]Singapore Financial Services ReceptionMay 28 [Hong Kong]Hong Kong Financial Services Receptionseptember 2012September 10-11 [Chicago]Captive Live USAOctober 2012October 4 [New York]Annual Bermuda Financial Services ConferenceOctober 23-25 [London]Diversified Assets ShowNovember 2012TBD [Toronto]Toronto Financial Services ReceptionNovember 12-15 [Johannesburg]Hedge Funds World AfricaDecember 2012December 9-11 [Bahrain]World Islamic Banking Conference 13
  14. 14. LOCAL calendar of events MAY 2012 May 7-8 [Fairmont Southampton] 10th Annual Family Office Symposium May 10 [Richmond House, Par-la-Ville Road] FREE SEMINAR - What You Don’t See Might Hurt You June 2012 June 3-6 [Fairmont Southampton] Bermuda Captive Conference June 7 [Richmond House, Par-la-Ville Road] FREE SEMINAR - I’ve Got the Job, Now What? June 12-13 [Fairmont Hamilton Princess] Insurance Day Summit Bermuda14
  15. 15. Business Bermuda is the organisation tasked with working This is where Bermuda is ahead of most of the competition,with both the private sector and the Government to ensure that since it already has in place the legislative and regulatoryBermuda’s international financial centre meets the real needs structures to accommodate retakaful as well as primaryof international businesses whether Islamic or conventional. takaful structures.Bermuda’s traditional links with a whole range of differentregions enables it to first identify and then supply the These structures are practical and realistic and responsiverequirements of a remarkably diverse range of users of takaful to industry needs because they are the result of cooperationand other Shariah compliant products and services. In spite between the Bermuda Monetary Authority and the industry.of a widespread assumption that takaful on any large scale isAs a result, takaful and retakaful operators can tap intoconfined to the GCC markets, the reality is much Bermuda’s resources to leverage access to capital as well asmore interesting. expertise, products and systems. And they can confidently do so without risk of theIt is certainly true that takaful uncertainty, excessive profit,remains a strong market in Saudi Not long ago Islamic finance was usury and gambling that canArabia because of the continued roll too small a component of the global bedevil conventional insurance.out of compulsory medical insurance. market to attract much attention. ItsBut, as measured by regions, the latest The Bermudian authorities fullycomparative figures for 2011 indicate new professionalism and phenomenal appreciate how important it isthat takaful contributions in the growth have happened so fast that to honour the key distinctionIndian subcontinent grew by no less between conventional andthan 85 per cent, making it the world’s global awareness has not kept up takaful insurance – namelyfastest growing takaful market. Some with the changes. This international veil of the relationships between theway behind has been the Levant, with insurance company and thea nonetheless impressive 40 per cent. ignorance will soon be swept away as more policy holders. Bermuda isThe GCC, at 31 per cent, comes in only people realise we are talking about what is also sensitive to the fact thatthird and barely ahead of South East there is no “one size fits all” now a trillion dollar industry – as large as theAsia and Africa. In terms of individual approach to takaful, and socountries, Indonesia topped the entire economy of a global giant such as the most suitable structuretakaful market, closely followed by India and still growing at way above industry will depend on the particularBangladesh and with Saudi Arabia product in question. Bermuda’ssome way behind in third place. speed. Analysts at PwC expect the market commitment to helping develop to double in the next five years to an eye Islamic finance is likely to proveLooking ahead a few years, it is highly advantageous both to thenoteworthy that the GCC is perhaps watering two trillion dollars. industry and to the Island.the most competitive market in theworld, with the largest number of Bermuda, lying 660 miles east ofplayers and the largest capacity for growth. the American coastline, has certainly come a long way sinceBut, as the market grows, problems will arise that will it was first settled by British sailors shipwrecked on theirpreclude many jurisdictions from benefitting to the degree way to the “new world” of Virginia in 1609. Now Bermuda hasthey might expect. For instance, the primary takaful market travelled a comparably long way in developing the “new world”cannot keep growing – and be truly compliant, in the of takaful and retakaful insurance. •judgment of many Islamic scholars – unless it is matchedby the development of a reasonably sized retakaful market. 15
  16. 16. Bermuda’s ILS Resurgencemichael frith Bermuda has long very useful for these and other fully-funded andConyers dill & pearman sophisticated products. been recognised as a sophisticated and Essentially, where an insurance company is being established responsibly regulated solely to enter into one or a series of fully collateralised insurance transactions, that company may register as a SPI, international financial provided that the various participants in the transaction centre. With a well- are sophisticated and the Bermuda Monetary Authority is developed infrastructure, confident that all parties have received adequate disclosure regarding the nature and effect of the contract in question. proximity and convenient air links to the US, The SPI legislation and related regulatory Guidance Notes Canada and the UK, and recognise the relatively low risk inherent in an insurer only writing one or a limited number of fully collateralisedCharles Collis a wealth of experienced contracts and the regulation of an SPI reflects the same. ForConyers dill & pearman and sophisticated service instance, the minimum share capital for an SPI is $1.00, the providers, the island has regulatory solvency margin is simply that assets must exceed liabilities, there is no requirement for a loss reserve opinion, naturally become a focal no regulatory approval is required for the return of capital and point for innovation in the in most circumstances a waiver of the statutory audit may be financial sector. obtained. The annual SPI license fee is currently set at $11,600, and SPIs enjoy an efficient and well structured incorporation In particular, Bermuda is considered and licensing application process with the BMA (even more so the centre of catastrophe reinsurance than with traditional insurer structures). The result of these expertise and is one of the largest regulatory characteristics is a very cost-efficient structure, reinsurance markets in the world, where the focus can be very much on developing the productestimated to provide over 50% of the worldwide property in question.catastrophe capacity, along with other innovative generaland long-term insurance business products. The combination As the essential requirement for an SPI is that the transactionof an extraordinary concentration of insurance talent with is fully collateralised, the SPI licence can be and has beena responsive and flexible regulatory environment has led used not just for P&C transactions, but also life the island leading the industry in the development of Further flexibility is provided through the Bermuda Monetarysophisticated insurance and reinsurance structures. Authority’s broad definition of “fully funded”, a definition developed in close consultation with the industry leadersIn addition to its breadth of insurance industry experience, most likely to utilise these sophisticated structures. It isBermuda is also a major centre in the international investment not necessary for a transaction to be fully funded withfund industry, with over US$200 billion of fund assets cash or other investments, as is the case with cat bonds;domiciled here, and over 2,000 investment funds registered the funding may also be provided through the use ofin and operating from Bermuda. There are also a significant reinsurance arrangements, swaps, letters of credit or othernumber of unregulated investment funds, primarily closed-end similar instruments. This means that SPIs can be used forinvestment companies and limited partnerships. transformations and a multitude of other transaction structures.All this positions Bermuda at the heart of the increasing In 2010, eight companies were registered as SPIs in Bermudaconvergence of the capital markets and the insurance/ and another twenty-three have been registered up to thereinsurance industry, making Bermuda a natural jurisdiction end of 2011, making them the single most popular class offor the development of sophisticated insurance-linked new insurers in Bermuda and clearly demonstrating theirsecurities (“ILS”) products and the establishment of ILS funds appeal in the island’s increasingly sophisticated insurancespecialising in investment in such products. market. All of the recent fully-funded sidecar transactions in Bermuda, including Lancashire’s innovative Accordion Re transaction, have utilised the SPI structure, and the use ofSpecial Purpose Insurers the vehicles for collateralised retrocessional transactions hasA particularly important recent catalyst for the surge in the also been popular. Alterra’s recent New Point Re collateralisedILS product development in Bermuda was the introduction in retrocessional vehicle is a particular demonstration of the2009 of legislation to create Special Purpose Insurers (“SPIs”). SPI’s use even where multiple cedants are involved. ProvidedThis new class of insurer was developed in order to provide a that each transaction is separately structured, a single SPI cancost-efficient and appropriately regulated corporate vehicle for be used for multiple deals, further increasing their potentialthe increasingly popular fully-funded insurance transactions. for efficiency.Initially focused on attracting cat bond and insurance sidecartransactions to Bermuda, the SPI structure has proven to be16
  17. 17. Of particular note, a number of cat bonds have been registered third party or dedicated transformer entity, with the Bermudaas SPIs in Bermuda, including Chartis’s Lodestone Re, State SPI structure described above being one of the most popularFarm’s Merna Re and Embarcadero Re for the California new tools available to the sector.Earthquake Authority, to name but a few. Together, theserepresent well over $2 billion in new cat bond issuances. New ILS products and funds are being developed at a healthyAs 2012 progresses, and the efficiencies of the SPI structure rate, and the sophisticated Bermuda infrastructure is keepingbecome even more widely known, we expect that new Bermuda in step with that development. Service providers are rampingcat bond issuances, using an SPI as up their operations to accommodatethe base reinsurance vehicle, will this surge in interest, withsubstantially exceed the $2 billion- In 2010, eight companies were organisations such as the Horseshoeplus total seen for 2011. registered as SPIs in Bermuda and Group and ISIS Fund Services joining forces in Q4 2011 to createILS Funds another twenty-three have been a new specialist Bermuda ILS fundConcurrently with the development registered up to the end of 2011, administrator.of the ILS products themselves, making them the single most popularBermuda has, quite naturally, The Bermuda Stock Exchange hasseen increasing interest in new class of new insurers in Bermuda and also assisted in the renewed intereststart-ups of funds investing in ILS clearly demonstrating their appeal in the in Bermuda as an ILS market. Ainstruments. Large institutional island’s increasingly sophisticated insurance number of the recent cat bonds haveand pension fund investors are been listed on the Bermuda Stockincreasingly attracted to the market. All of the recent fully-funded Exchange, and in order to encourageprospect of returns not correlated sidecar transactions in Bermuda, including additional listings, the Bermudawith the equity markets. ILS funds Lancashire’s innovative Accordion Re Stock Exchange has recentlyare also being formed covering lowered its listing fees.areas beyond the typical natural transaction, have utilised the SPI structure,catastrophe risk type to life and the use of the vehicles for collateralised With these developments, andinsurance and man-made events the continued innovation of the retrocessional transactions has alsosuch as terrorism. Bermuda insurance and investment been popular. fund market, we expect that theILS funds may invest in a variety of island will continue to lead the ILSinsurance related instruments, but industry into 2012. •typically there is a mechanism to“transform” the reinsurance instruments into securities whichcan be invested in by the Fund without exposing the Fundto the need to itself license as an insurer under applicableinsurance regulations. This is typically through the use of a 17
  18. 18. Experience the World’s LargestCorporate Multi-Sport FestivalThe Bermuda Corporate GamesOctober 25-28, 2012A precious jewel set in the North Atlantic 2005 (after hurricanes Katrina, Rita and Wilma). Bermuda has emerged as a global insurance centre whose companies boastOcean, a pristine environment less than two total assets of approximately $500 billion and shareholders’hours from the East Coast of the USA; equity of some $120 billion.Bermuda is far more than its beautiful beaches and Bermuda’s businesses prosper because the Island offersextraordinary diving, with over four hundred years a stable operating environment, an educated workforce,of history and incredible architecture. regulation of the highest international standard, a pro- business mentality and tax neutrality. All supported by aIt’s the perfect mix of business, sport and tourism! It is also top quality support services infrastructure offering legal,the first host country to stage the largest multi-sport festival accounting and banking facilities.called the Bermuda Corporate Games. Bermuda is open for business! Business that will complementWhy Bermuda? It’s a major international business centre; and support the other key pillar of our economy: tourism.home to some of the world’s best known and most respectedinsurance and multinational companies. So what are the Bermuda Corporate Games? From small beginnings in San Francisco 25 years ago, the Corporate GamesBermuda’s financial services sector is composed of several has become a global phenomenon, a mass participation, multi-allied but quite distinct activities, including commercial sports festival that has brought together 20,000 companiesinsurance and reinsurance, captive insurance, corporate and from 25 countries around the world and over 1 millionpersonal trusts, fund administration, international registers of participants; and now, for the first time in the Atlantic Region,aircraft and shipping and Islamic finance. Bermuda will host its inaugural Games in October 2012.The most visible and important activity is commercial The Bermuda Corporate Games are a combination ofinsurance and reinsurance. Bermuda’s first insurance company business, sport and tourism, with teams pitting themselveswas formed in 1903 to provide local on-island coverage. The against others in a spirit of friendly competition providingfirst international insurer arrived on the island in 1947. Since the opportunity for companies to invest in their employees,the mid-1980s, the ongoing formation of insurance companies to build company morale, confidence and loyalty, whilepeaked with waves of new capital in 1993 (following Hurricane promoting their corporate brand.Andrew), 2001 (after the tragic events of September 2001) and18
  19. 19. Competition will be inclusive and accessible to all, with excited about the exposure Bermuda will receive from thisvisiting companies competing against international and local event, and as such, I am pleased to endorse and support thecompanies, government agencies, sports clubs and other 2012 Bermuda Corporate Games.”community organizations. Minister of Bermuda Youth, Family and Sport, the Hon. GlennA recent McKinsey survey on the ‘impact of the economic A. Blakeney, JP, MP added:downturn on businesses’ noted the critical importance of non-financial motivators. With staff morale at an all time low, and “This event promises to be one of the largest corporatewhen businesses need staff to contribute above and beyond events to come to the Island, and it is a great opportunity tonormal expectations, participation in events such as the showcase Bermuda and our fine sports facilities. The BermudaCorporate Games will result in greater staff retention, through Corporate Games will add to our efforts to be recognized as ateam building, reinforcing employee confidence and enhanced world class sporting venue with excellent infrastructure andloyalty, resulting in a positive image of their company. uniquely welcoming amenities”.The Corporate Games have been brought to Bermuda by The The Bermuda Corporate Games are for the everyday athleteWhitfield Group Ltd., the Island’s leading marketing and or ‘weekend sport warrior’ and are open to all ages withevents agency for the past 25 years, who are the sole licensee no qualifying standards required. The opportunity to buildfor the Atlantic region, which includes Bermuda, the east coast corporate morale, through friendly competition whileof the US and Canada, the Caribbean and Toronto. networking and developing new client contacts, all wrapped around a four-day multi-sport festival, offers a range ofSuzie Pewter, President of The Whitfield Group, commented: positive outcomes for competing organizations due to the ultimate mix of sport, business and tourism!“We are delighted to be able to bring the Corporate Gamesto Bermuda and to be able to partner with the Bermuda So take this opportunity to see Bermuda up close, talk toDepartment of Tourism. This is an outstanding opportunity the companies that are thriving on the island or create newfor corporations to invest in their employees, promoting relationships with the visiting corporate building, confidence and loyalty, while enhancing theircorporate brand and networking with other local and visiting Join us for hand shakes and high fives at the Bermudaparticipating organizations”. Corporate Games, October 25-28, 2012.The Minister of Business Development and Tourism, the Hon. For more information on this exciting event contact:Wayne L. Furbert, JP, MP, whose Ministry is providing criticalinfrastructure support and the Host Country sponsorship Suzie Pewter, Presidentcommented: The Whitfield Group Ltd. Atlantic Licensee for: Bermuda Corporate Games“The Bermuda Corporate Games are being billed as the t +441 232 9999quintessential event that will attract local and international f +441 292 6990business participants, inviting them to engage in several days e play@bermudacorporategames.comof fun and competitive sporting activities. We are thrilled and w •Sports include:• Badminton • Netball • Squash• Ball hockey • Rugby 7s • Swimming - long distance• Basketball 3s • Running • Tennis• Beach volleyball 4s • Sailing - 420 • Tenpin bowling• Golf • Soccer 6s • Touch• Hockey • Softball • Triathlon 19
  20. 20. Partner with People who Know Risk Do you know your Risk Neutral state? Understanding your Captive’s Risk Neutral state is why partnering with a strong investment risk manager is important. Capital G Captive Solutions delivers risk management expertise from Bermuda, the world’s top Captive Jurisdiction. Capital G Captive Solutions · Banking · Trusts · Asset Management TO LEARN MORE: +1 441.294.2471 Welcome to the family. Orion Investment Management Ltd. is a wholly-owned subsidiary of Capital G Investments Limited. Capital G Investments Limited and its wholly-owned subsidiaries are licensed to conduct Investment Business by the Bermuda Monetary Authority.20