Bermuda’s captives industry remains robust and makes a substantial contribution to the country’s economy. But the sector also faces challenges and must learn to adapt and step up in the future – a process that could also mean some tough discussions with the regulator.
That was the message from Jeremy Cox, executive chairman, Bermuda Monetary Authority (BMA), and the 2019 recipient of the Fred Reiss Lifetime Achievement Award, in a keynote address given to the Bermuda Captive Conference yesterday (Wednesday June 12).
Speaking in the year that is also the 50th anniversary of the BMA, Cox walked the audience through the history of the BMA from its humble origins to being the regulator of all financial services on Bermuda, operating in an increasingly challenging and complex landscape with a staff of some 210.
He acknowledged that the regulator plays a dual role: as well as being a regulator of the market, it is also a guardian of the Bermuda brand. “Our mission statement now includes the protection and enhancement of Bermuda’s position as a leading financial centre,” he said.
Speaking of the captives sector specifically, he said that while the rapid growth the sector had seen in the past was likely over, the sector remains as strong as ever and its economic benefits are substantial. He estimated that the sector employs 550 people on the island directly and contributes $174 million to the economy annually.
He also stressed the significant contribution it has made as a training ground for many executives whose careers have then moved into other parts of insurance or financial services. “They honed their technical and leadership skills in the captives sector and learned lessons they will never forget,” he said.
So far, Cox said, the BMA and the captives sector have had a symbiotic relationship. “But that does not mean we will always be deliriously happy with each other. There may be times when we find ourselves on the opposite sides of an issue, be it because of a stance we have taken or because our approach is perceived as being ridged,” he said.
He said the key going forward would be communication and consultation. He said the BMA was always happy to explain its position on anything. “But you have to remember that we have a role as a gatekeeper to safeguard the financial services sector on Bermuda.
“On this basis, I would encourage those that think the captives sector is becoming subject to too much regulation to think again; and those who feel we bend over backwards to please commercial carriers to re-examine their conclusions. Captives have their roots in Bermuda but we must adapt and move forward and we have to be ready to step up.”
He also discussed the EU Economic Substance Act which he described as a game changer for Bermuda. “We have to respond by demonstrating an appropriate level of vetting and showing that we will not accept businesses that even remotely resemble a sham,” he said.
He went onto say that Bermuda needs a vision that goes beyond simply “getting in the EU’s good books”.
He spelled out a vision of Bermuda keeping pace with innovation and developing a new model for the captive industry where Bermuda becomes known as the most competitive and welcoming domicile for captives, based offshore but with onshore qualities as well as becoming as well known for innovative captive business and dealing with new risks as it now is for commercial re/insurance business and the insurance-linked securities (ILS) sector.
BMA, Jeremy Cox, Bermuda Captive Conference, Bermuda