Reports of our economic death have been greatly exaggerated
I have been reading the coverage of the Bermuda Business Confidence Index and feel compelled to offer my perspective as a member of the island’s business community.
As head of one of world’s largest property-casualty insurance companies with operations in Bermuda, as the former chairman of the Sage Commission and as a Bermudian whose family live and work on the island, I have a pretty good sense of what’s going on here and whether the results are indeed a “canary in the coalmine” as they have been described by the research firm responsible for administering and interpreting the index.
Call me an optimist, or call me crazy, but I don’t agree with this description.
It makes it sound as though business is shunning Bermuda. I think the opposite is true.
While no one can argue that the debt and deficit we are carrying need urgent attention, we have ample evidence that the green shoots of change are starting to take hold.
When the cofounder of Ethereum, one of the original bitcoin/blockchain initiatives, describes Bermuda as a “start-up nation”, we should understand that this isn’t idle, uninformed praise.
When new company registrations are up 41 per cent year-on-year, with 41 new insurers and reinsurers registering as of August, and when insurance-linked securities issued from Bermuda represent almost 75 per cent of global outstanding capacity, we should celebrate the healthy growth in our company register and the unchallenged dominance that Bermuda holds in the ILS sector.
When tourism spending increases for a tenth consecutive quarter, and visitor arrivals out of a key city such as Boston balloon by 60 per cent in the first half of the year, I have to conclude that the twin pillars of our economy are holding their own in the face of intense competitiveness, regulatory pressure, and global social and political upheaval.
As far as Bermuda’s insurance and reinsurance market is concerned, there is much hand-wringing around the recent spate of mergers and acquisitions. There is a tendency to adopt a “sky is falling” attitude when industries look like they are starting to consolidate.
As someone who has worked in insurance for more than 40 years, I know that this is business as usual. There are many reasons for one company to acquire or merge with another, but there is always a central theme: how can we diversify our revenue stream, contain or reduce costs, and more efficiently deliver products and services to our clients and value to our shareholders?
If you look at recent M&A activity in Bermuda, you will see one or more of these forces at play. Axa’s acquisition of XL Catlin, Apollo’s of Aspen and, indeed, AIG’s of Validus, were all driven by boards of directors and executive management teams weighing a variety of options for creating sustainable, profitable companies.
This type of activity happens in cycles. It is a natural response to the arc of business evolution.
This year, I established a Bermuda company with $40 billion in assets. My colleagues at AIG and I didn’t do this because we have a fondness for the island; this was a strategic decision made because Bermuda is the right market for this business.
The important thing to note about these and other deals is that all of these companies are acquiring assets to keep assets in Bermuda. While there will be some reorganisation, opportunities will be presented that feed the vibrant entrepreneurial spirit I see reawakening in Bermuda.
Having said that, I agree with the sentiment expressed by Chamber of Commerce president John Wight and Bermuda Economic Development Corporation executive director Erica Smith that we have to find a way to increase the number of permanent residents in Bermuda.
There are two indisputable facts that we cannot ignore — both raised as true “canaries in the coalmine” in the final report issued by the Sage Commission in October 2013: our population is ageing, and the exodus of Bermudians to live in other locations is significant.
As a result, we do not have enough residents to meet the cost of running Bermuda, let alone to develop new sources of revenue. Even if every Bermudian who has left the Island came back, we still couldn’t service our debt or diversify our economy.
I believe that the Government recognises the impact this reality has on an industry such as the one I work in. And I don’t believe that the Government is anti-business. But its immigration policies and work-permit practices need to reflect that recognition, and all Bermudians need to understand our population dynamic. It is not too much of a stretch to label our ageing, declining population as an existential threat to the island.
Everyone who heads a company in Bermuda would rather hire a qualified Bermudian than go to the trouble of bringing someone here to work. But it is virtually impossible for a country of 62,000 to meet all of the personnel needs of the Bermuda insurance market.
We cannot, on the one hand, laud our mature sophistication and innovative business culture and, on the other, not admit that we do not have all the skill sets needed to propel us to the future.
If we want to broaden our tax base and revenue stream by developing other industries besides international business and tourism, we must invite more people to join us in living here — and make them feel welcome.
I know this is a complicated, emotive issue. We have a lot of historical baggage that makes it difficult to have open conversations about how to resolve this. However, with a commitment from the Government and the private sector, we can have those conversations and find a solution that works.
Several chief executives of local and international insurance companies joined me in May to announce the Bermuda Infrastructure Fund, a $100 million initiative created to invest in projects that will bolster the island’s roads, bridges and other physical-plant operations that are in need of attention.
Like AIG’s decision to invest in a Bermuda company, this fund was borne of a deep and abiding commitment to the island’s future. It is another example of the confidence in Bermuda that I believe runs through our business community.
• Brian Duperreault is the president and CEO of AIG
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