Bermuda’s Business Advantages
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As a “hothouse for innovation” in financial services, Bermuda can play an outsize role in tackling some of the world’s greatest challenges. So says Stephen Weinstein, Chairman of the Bermuda Business Development Agency (BDA), who says there is no jurisdiction on Earth better suited to matching capital and risk.
The island has a track record of attracting entrepreneurs with smart solutions to tackle global problems during times of crisis – and over the decades has built up a cluster of exceptional risk-management expertise.
Mr. Weinstein himself is an example of that powerful intellectual capital. For nearly two decades, the Harvard Law School graduate led the legal department at RenaissanceRe, one of Bermuda’s most consistently innovative reinsurers.
“The culture of innovation and creative disruption is so broad and deep that it’s hard to convey to people who haven’t spent a lot of time here the degree to which proximity, collaboration and an ethos of daring contribute to foster continual, disruptive innovation,” Mr. Weinstein says.
The island’s world-leading re/insurance industry has evolved in response to urgent situations, including the excess liability insurance crisis of the mid-1980s, the dislocation of the property and casualty insurance business after Hurricane Andrew in 1992, the 9/11 terrorism attacks of 2001 and Hurricane Katrina in 2005. With the “Class of 2020-21”, the surge of new companies and tens of billions of dollars of capital entering the island’s vibrant re/insurance market, it’s happening all over again.
“For market crisis after market crisis in the global insurance sector, it’s been Bermuda companies, entrepreneurs and talent that have led the way to address those problems and find solutions,” Weinstein says. “We’ve seen it recently with the response to the pandemic. Bermuda companies, both new entrants and established players, have raised substantial new sums to provide new solutions and to keep the promises they’ve made to their clients.”
The market’s long track record of living up to its promise to pay, has solidified the island’s reputation as the place to solve emerging global risk challenges.
“The default rate in the Bermuda re/insurance market from the dawn of time until now is literally 0% – it’s better triple-A bonds,” Mr. Weinstein says. “Every Bermuda player of any scale has kept all its promises to all its clients worldwide. I believe that will be true of the innovative new spaces the BDA is helping to shepherd new entrants to as well.”
As the Bermuda’s re/insurance market has grown in size, sophistication and global importance, so has its financial-services regulator, the Bermuda Monetary Authority (BMA). International recognition of the island’s regulatory standards has come in the shape of third-country equivalence with the EU’s Solvency II regime, as well as Qualified Jurisdiction and Reciprocal Jurisdiction status from the National Association of Insurance Commissioners in the United States.
“Bermuda is fortunate to have the world’s best business-to-business regulator in the BMA. Robust, sophisticated and independent, they are a competitive advantage for launching new businesses, whether in reinsurance, or new forms of innovative risk transfer, or blue-ocean strategies we see in climate-risk finance.”
“Bermuda is fortunate to have the world’s best business-to-business regulator in the BMA,” Mr. Weinstein says. “Robust, sophisticated and independent, they are a competitive advantage for launching new businesses, whether in reinsurance, or new forms of innovative risk transfer, or blue-ocean strategies we see in climate-risk finance.”
The dialogue between government, regulator and industry enables an optimal business environment, and the BMA appreciates the need for quick answers when entrepreneurs are ready to put investors’ capital to work.
Mr. Weinstein says: “The door is always open, they are nimble. I tell people that I only propose things to the BMA that I think make sense, and 90% of answers have come back to me in the affirmative. But in the 10% of times that I don’t hear what I want, at least I hear it quickly. The speed to market that the BMA thereby affords is a competitive advantage.”
As well as being a place where businesses can thrive, Bermuda offers a great environment for personal development, Mr. Weinstein says, speaking from experience. “Like a lot of people, I came down here for two years and I’m in the 20th year of that rotation. Bermuda contributed so much to the company I was part of, and the life of my own family. My children were born here and the company went from to 30 employees to 20 times that worldwide.
“Bermuda’s proven itself to be not only the best place to match risk and capital, and to run a global financial-services company, but was also for us the ideal place to grow a young family and have the time of our lives. Bermuda has meant everything to me.”
The island is also unmatched as a place to develop a professional network, Mr. Weinstein adds.
“There’s no other place in the world where you can commute to work in your Bermuda shorts on your scooter to one of dozens of highly capitalized, listed companies, and be surrounded by the per-capita ratio of intellectual talent we have here in Bermuda.
“It’s an utterly unique environment to develop in as an executive. Not only to start off as a young professional in our industry, but also to maintain and be reinvigorated as a senior executive by exposure to the energy and creativity of young professionals. There’s no place in the world like it.”
Developing homegrown talent is key to the success and stability of the industry. Companies have invested “both dollars and sweat equity in the form of mentorship and guidance” to nurture Bermudian talent. The results are evident: some 70% of employees of the Association of Bermuda Insurers and Reinsurers’ (ABIR) member companies are Bermudians.
The Bermuda Foundation for Insurance Studies (BFIS) has been a gateway into the industry for hundreds of young islanders. Others have come through the Bermuda Institute of Ocean Sciences (BIOS), of which Mr. Weinstein is a board member. “The skills one learns as a marine scientist – numeracy, the scientific method, project management – translate extremely well to catastrophe-oriented reinsurance, as well as other forms of financial services,” he says.
The growing strength of homegrown expertise has become a feature of the international business sector. Mr. Weinstein says: “I would counsel any investor or entrepreneur looking at Bermuda to really embrace our diverse, tech-fluent and committed pool of human capital as a core competitive advantage that is open to you.”
As Chairman of the BDA, for which he volunteers, Mr. Weinstein’s role is to promote business development and economic growth. Telling the story of Bermuda’s business attributes comes naturally to him, as someone who has thrived professionally on the island within a fast-growing company. It’s a role he feels privileged to do.
“What Bermuda offers is what the world needs. We’re a laboratory for innovation and a welcoming place to operate.”
“It’s the role of the BDA to promote Bermuda’s reality, that we are the best place in the world to innovate, to operate and to run financial-services companies and particularly to match global risk and capital,” Mr. Weinstein says. “What Bermuda offers is what the world needs. We’re a laboratory for innovation and a welcoming place to operate.”
Overseas critics sometimes have a preconceived notion of Bermuda as a “tax haven”. So how does Mr. Weinstein counter such accusations?
“I begin with reminding any party that Bermuda meets or exceeds all global standards for cooperation and transparency. Bermuda is the best place in the world to raise money and a terrible place to hide it.
“If your strategy is one that would benefit from secrecy in the shadows, then you should look elsewhere, because Bermuda is not a home for you. If you embrace openness, transparency and business strategies that provide value to markets internationally, then we’re a perfect home for you. Bermuda has played a disproportionate role in bringing capital and expertise to the world’s biggest problems.”
Of all the challenges humanity must face in the coming decades, climate change – and its pervasive effects – may be the most testing of all. More severe weather and rising sea levels are likely to mean more damaging natural disasters. The Bermuda market’s expertise in understanding, modelling, mitigating and insuring such risks give it a strong claim to be the world’s climate risk capital.
“We are renowned the world over for our expertise and collaborative approach to finding solutions ranging from floods to hurricanes, to earthquakes to extreme swings in temperature,” Mr. Weinstein says.
“The world’s biggest challenges are simultaneously the most exciting opportunities for business and investment. And the attributes of our jurisdiction are a perfect fit for that terrifying, but also exciting, set of challenges.”
“The world’s biggest challenges are simultaneously the most exciting opportunities for business and investment. And the attributes of our jurisdiction are a perfect fit for that terrifying, but also exciting, set of challenges.
“The past is not prologue when it comes to climate risk and the skill set that Bermuda has displayed for 30 years is exactly what our core markets will be looking for.”
A lack of insurance penetration, mostly in developing countries, mean natural disasters cause high levels of uninsured losses that leave communities taking much longer to recover. In 2019, more than 400 natural catastrophe events generated economic losses of $232 billion, but only $71 billion were insured, according to Aon. Narrowing this “protection gap” becomes even more critical as the planet warms.
Finding ways to expand insurance coverage in vulnerable countries is a key aim of the Insurance Development Forum, a public-private partnership that has significant support from members of ABIR.
Mr. Weinstein said the modern Bermuda reinsurance industry began with the imperative of closing a protection gap that emerged in the United States after Hurricane Andrew. “It was pioneering technologies and business strategies in Bermuda that helped to close that protection gap,” Mr. Weinstein says. “We see that pattern over and over again, whether it’s perils in the developing world or in the world’s leading markets like US earthquake.
“It’s this expertise and entrepreneurial spirit in Bermuda, partnering and collaborating with public and private partners the world over, that can bring financial solutions to help the world close the protection gap, and in doing so, promote resilience for businesses, communities and individuals, as these perils accelerate.”
Bermuda has a truly global vision, Mr. Weinstein says, whether it’s supporting reinsurance clients in Japan in respect of tsunamis and earthquakes, government bodies in Thailand with respect to flooding, or innovative new strategies to close the protection gap in markets like Africa and Asia.
“Bermuda’s a player on the global stage and the ideal place to match global risk and global capital.,” Mr. Weinstein said. “It’s an ideal time zone, location and business culture to address solutions the world over. It’s a diverse and international marketplace of ideas and people here and we welcome innovation and people from around the world.”
Bermuda has the characteristics to thrive and remain relevant in a fast-changing world, Mr Weinstein adds. “Innovation and adaptability are hardwired into the DNA of the Bermuda business culture. We’ll continue to see innovation in our traditional market leaders like reinsurance, and we’ll see entirely new verticals in the future I believe. The team at the BDA, by telling the Bermuda story, and helping investors and entrepreneurs understand those advantages, will play a big role.”