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(CNS Business): Premier McKeeva Bush has said that while Bermuda has been the champion of the insurance and reinsurance industry, the Cayman Islands was now a better choice and could grow in this market “without the malice, without the inhibitions of race, without the inhibitions of transport.” Speaking at the 11th annual Insurance-Linked Securities Summit, Bush said that in addition to changes to immigration policy to entice the industry to this jurisdiction, his government intends to offer financial concessions that will dramatically reduce operational costs compared with other financial centres. An industry expert at the summit said Bermuda would lose out because it had adopted its own capital rules that in many ways were similar to the European-led Solvency II regulation, which he described as a “huge miscalculation”.
“Over the next two years we are going to see a lot of business which has historically been in Bermuda pick and leave to come here and it’s already begun,” said Jeff Mulholland, managing director and head of insurance and pension solutions for the Americas with Societe Generale. “My prediction is: buy Cayman real estate.”
Mulholland outlined the reasons why he believed that Cayman should expect an influx of new business and new industry professionals at the same time, stating that the industry was not looking for light regulation.
“We are looking for very highly sophisticated, very efficient regulation which means people who are on point and who understand the risks and how to analyse the risk for the policy holders and shareholders and provide an appropriate reaction to and management of those risks. We are not looking for a jurisdiction that turns a blind eye to those risks because in the process the credibility of the product is dramatically reduced,” he said.
Appropriate legislation was the first priority for the industry and in his mind Cayman and Bermuda were the only credible choices in this regard. “When you consider the most important criteria is efficient regulation, immediately the US, Canada and Europe drops out of the game,” he confirmed.
Now that the choice had been narrowed down to Bermuda and Cayman, Mulholland said that Bermuda could be discounted because it had decided to adopt its own capital rules which in many ways were similar to the European-led Solvency II regulation.
“This is important because by kowtowing to the Europeans effectively Bermuda has just made itself obsolete. I think it was a huge miscalculation by the Bermudan government,” he said, stating that this would be a “huge problem” for Bermuda over the next ten years and that it has already started to impact the industry. As a result Cayman was going to see a tremendous influx of capital and expertise.
“In the advisory work we do right now this is not a controversial statement,” he confirmed, “This is a majority view and a view that has changed over the last year.”
The primary life insurance industry and the life reinsurance business which historically has sought to execute and provide capital relief to onshore companies in North America and Europe would now be attracted to Cayman, he said.
In his welcome at the conference, held this week at the Marriott Beach Resort, Premier McKeeva Bush outlined the reasons why Cayman made a far better choice for the insurance and reinsurance industry than its competitor, Bermuda. He described how Cayman had much more to offer industry professionals on many levels – from the ease of doing business to the ease of living in Cayman. He said that changes were in the pipeline to ensure that such professionals made Cayman their number one choice, including a raft of new immigration and financial concessions to dramatically ease the path for business in this industry.
“It’s because we recognise the need of expertise in our local work force that the government has decided to offer a package of concessions for the international insurance and reinsurance industry which will allow them to attract and retain the top professionals in their field. Not only will insurance and reinsurance companies benefit from immigration concessions, it will mean an expedited process allowing workers at all levels to take up their post in a matter of days instead of weeks or even months,” he said. “In addition to this immigration policy my government intends to offer financial concessions which will dramatically reduce operational costs compared with other financial centres.”
The new insurance law, slated to come into effect at the end of this month would strengthen Cayman’s domestic insurance industry and help to secure Cayman’s strong market position within the captive insurance industry. Bush called it a “significant achievement” and such changes within the industry were a “clarion call” to attract new business to the Cayman Islands.
Bush said Cayman was actually taking action while Bermuda was only still talking about making changes.
“In the mid Atlantic they say they ‘may’ reduce some fees; we have reduced fees. They are still talking about their immigration policy and make long statements but I say this boldly – while Bermuda has been the champion, be assured that we can grow. We here can do it without the malice, without the inhibitions of race, without the inhibitions of transport,” he said. Bush went on to say that immigrants in Cayman could still build decent homes and could still own them.
“My rating is still AA3 rating – what is theirs?” he taunted, a reference to the downgrade of Bermuda’s sovereign credit rating last year to AA-.
From the local industry’s perspective, Cayman Islands Stock Exchange Chairman Anthony Travers stated, “In a robust presentation by the premier which highlighted favourably the distinctions between the Cayman Islands and Bermuda, the crucial point that came across was the changes made to the immigration legislation which would enable an investor owning 10 per cent or more to have a 25 year certificate of permanent residency.”
Travers said that one the advantages that Bermuda had held over the Cayman Islands thus far had been its pool of human talent which had demonstrated expertise in the reinsurance area. This had enabled a genuine reinsurance market to develop in Bermuda.
Up until this point this had not developed in Cayman because of immigration restrictions, he said.
“The attractiveness of the new regime to be introduced by the premier should not only redress the balance in that area but give Cayman a leading edge,’ he explained. “Speaker Jeff Mulholland highlighted in addition a further distinction because Bermuda has introduced the European-inspired Solvency II regulations, which have a politically motivated capital requirement which has not been introduced in Cayman. This will favour the probable migration of reinsurance companies from Bermuda to the Cayman Islands.”
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