Bermuda: sun shines on the reinsurance island once again…
Premier E. David Burt on a Bermuda renaissance, $19bn capital wave, new entrants, “re-setting” relationships, climate risk finance, visas and the pandemic.
Bermuda is open for business. This is the driving message from an upbeat Premier E. David Burt after a year which which has seen the Bermuda “mousetrap” validated by an estimated $19bn of fresh capital backing “Class of 2020” start-ups/scale-ups, a new mandate following the island’s October elections and plaudits for the way it has managed the pandemic crisis.
The Insurer sits down with the premier in a no-holds-barred interview which covers Bermuda’s yet-to-be unveiled Climate Risk Finance Initiative, what he thinks of the “independence” issue, his response to recent reinsurance entrants, the relationship between business and Bermudians and his determination to make the island a home for digital innovation as well as reinsurance.
Premier Burt – who was the youngest ever Bermudian leader when first elected in 2017 and leads the Progressive Labour Party – hints at the prospect of more launches to come this year but is also candid in acknowledging the challenges faced by Bermuda over the last decade.
However, as The Insurer discovered recently, there is a notably more upbeat mien among (re)insurance executives on the island compared with recent times, including last year. Some figures are even cautiously predicting the next few years may echo the island’s reinsurance boom years before the financial crisis ushered in new challenges.
This optimism is manifesting itself in a number of ways. The flurry of capital and new carriers, the arrival of more overseas professionals – reversing a trend of the past decade which saw onshoring and M&A lead to a migration off the island – the creation of more jobs and the fact that offices, restaurants and bars are open for convivial face-to-face meetings. A stark contrast to Lime Street where the Lloyd’s building remains closed, a visible symbol of the continuing working from home phenomenon at the industry’s oldest face-to-face market.
Premier Burt is careful to acknowledge the difficulties the island still faces – not least the hit to its important tourism economy from Covid-19. But he is also proud of the island’s handling of the pandemic and says recent events have confirmed people “[still] believe in the Bermuda story”…
Peter Hastie: First, congratulations on your re-election. We’ll be naturally focusing on insurance, but for our readers outside Bermuda, what will your domestic priorities be in your second term?
Premier David Burt: The objective for the second term is to execute as we did the first time around on our pledges that I was elected on. The pandemic meant we didn’t finish everything we wanted to do before 2020 and, naturally, this has created challenges for the island, as it has for countries around the world. So, the task in hand is rebuilding the economy where we have to and strengthening it. This benefits everyone who calls Bermuda home – Bermudians and business.
Peter Hastie: Bermuda has received plaudits for handling the pandemic so well. There is a real contrast between, say, London – still in lockdown after a long winter – and Front Street, where people are meeting, going to restaurants, talking and doing business. Are you pleased with how the island has responded?
Premier David Burt: Yes, we certainly are proud of it. But the plaudits should not go to us as politicians. Praise should go to the people who are doing the testing – we have a brilliant testing regime which you will have experienced flying in. It’s the people doing the contact tracing, the border enforcement and the good people of this country who are complying with health protocols who deserve the kudos. And we should also commend our international businesses and insurers, who opened up their pockets and gave financial support to make sure help went to those who have been most affected by the downturn in our tourism industry.
Peter Hastie: How did you get it right when so many have got it wrong?
Premier David Burt: Well, of course, we are lucky in the sense that when you’re an island, you can control your borders. But beyond that, we also made our own luck. For example, we asked questions quickly rather than standing still. We were fortunate that we had one of our scientists devise a testing regime that is incomparable to anywhere else on the planet. In addition, the excellent work of our Ministry of Health has meant we have a vaccination programme that puts us in the top 10 globally for distributing vaccinations. I’m literally checking my phone – yep, we have more vaccines scheduled to arrive on the island this week.
Peter Hastie: Has Bermuda’s relationship with the UK government helped in this regard?
Premier David Burt: It has. The United Kingdom has been incredibly generous to assist with the supply of testing kits. And when it came to the vaccines, the British government said the proportional amount of vaccines the UK had for its populace, it would supply to overseas territories. That is the reason, out of the top-10 countries that are vaccinating, some seven out of 10 are either in the United Kingdom or the UK’s overseas territories.
Peter Hastie: Will this reduce calls for full independence? Perhaps less so than normal last year, but it is a topic that tends to come up on the island during elections…
Premier David Burt: It is no secret my party is naturally sympathetic to redefining our relationship with the UK. But I reject the term “independence” because that conveys something in people’s minds it is not. Indeed, in 2020, is there really such a thing as an independent country? We are all interconnected. Should we look to redefine our relationship for the benefit of Bermuda? For example, we do not conduct foreign affairs; those are conducted by the United Kingdom. Our international business community is concerned Bermuda cannot lobby international organisations directly. Is that right in the long term? After all, the United Kingdom is no longer in the EU. That was the decision of the British people, but it is difficult to see how that was in the interests of Bermuda or its international businesses.
“It is no secret my party is naturally sympathetic to redefining our relationship with the UK”
So, I think there is a discussion to be had one day as to what is the best construct for Bermuda. What is the best construct for us long term, what is the best construct for our insurance industry, what is the best construct for growth?
Is it what we have right now? Maybe it is, maybe it isn’t, but Bermuda is successful because we’ve never been shy of innovating, so we should always be questioning the status quo. Perhaps we will devise a new structure that has never been tried before, who knows? In saying all of that, the relationship that Bermuda enjoys with the UK is a good one and it will continue to be a good one and we value that.
Peter Hastie: Change can, of course, be good, but business likes certainty. Should industry be concerned that this debate is coming?
Premier David Burt: Our focus is making sure we deal with things. When this issue comes up, which it always does around elections, the country does not have to worry about the Bermuda Progressive Labour Party not executing our election manifesto. We execute our labour manifesto every single time, we hold fast to our word, that is what we do.
And sovereignty was not part of our election manifesto.
If, in the future, there is a discussion and debate, then it will happen with the involvement of all parties and the people of Bermuda. But it is not an issue for now.
Peter Hastie: Let’s focus on business, as that is what our readers are interested in. What are your priorities here?
Premier David Burt: From a leader’s perspective, we’re very fortunate to have a strong and resilient insurance sector, one that provided an income, opportunities and support to Bermudians during the pandemic. It has been particularly important to the island when the tourism economy has been so badly affected. Insurers did not let people go, companies reset and their staff worked from home remotely.
It is an incredible fact that the number of jobs in international business in Bermuda actually increased in 2020. There can’t be many – if any – countries that can say that. But Bermuda can. I believe around 180 extra jobs were created – that’s a tremendous achievement.
Peter Hastie: You say Bermuda’s insurance industry is resilient. What do you mean by this?
Premier David Burt: Bermuda has faced challenges over the past decade, whether in the US, the EU [the European Union briefly categorised Bermuda as a non-co-operative jurisdiction in what was widely seen as a mistake; it was corrected in 2019] or the OECD [its campaign for minimum global tax levels]. But we have managed all of them with our insurance partners and I would say come away stronger.
“It is an incredible fact that the number of jobs in international business in Bermuda actually increased in 2020. There can’t be many – if any – countries that can say that. But Bermuda can”
Indeed, we have made a lot of progress over the past four years in office, leading to more stability for existing insurers and additional attractions for new ones. For example, we have worked closely with the US National Association of Insurance Commissioners over its collateral reforms, which will benefit Bermuda insurers and also their customers, because they can operate more effectively.
We have also seen, with the new insurance companies that have started up on the island and those that have expanded, that people believe in our resilience and believe in the Bermuda story.
Peter Hastie: What is the unique selling point that is Bermuda?
Premier David Burt: There are many – location, language, political stability, expertise, pedigree, infrastructure, laws, but the jewel in the crown is the Bermuda Monetary Authority (BMA). It may sound weird to some to imagine your calling card is being ‘good at financial regulation’, but it is for us. We are good at it and this gives business the confidence to come here, and it gives overseas customers the confidence to deal with us.
“When you have people like Stephen Catlin setting up Convex, it shows the confidence business has in the island. And there are others who are coming to the island who I can’t even talk about yet”
Peter Hastie: There’s a tension always, of course…
Premier David Burt: But that’s healthy. I have talked before about the holy trinity in Bermuda – government, industry and the regulator. Yes, there are tensions, but there have to be. What’s important is that we all work together and that has served us well for the last 50 years or so.
Peter Hastie: Will there be changes with Jeremy [Cox CBE, the long-serving executive chair of the BMA] retiring later this year?
Premier David Burt: Jeremy has been an excellent leader, but we have equal confidence in his successor Craig [Swan, deputy CEO of the BMA]. He joined the BMA in 2006 and is particularly well-versed in dealing with insurers and banks, as well as digital assets. I am confident the BMA will continue to move from strength to strength and will continue to do what it does best – world-class regulation.
Peter Hastie: You mention digital assets. You are known for championing Bermuda as a hub for innovation. Are you making progress?
Premier David Burt: I think initiatives later this year will highlight the progress we are making. Ultimately, what we are doing is making it easier to get innovative digital businesses started and make us a centre of innovation. This manifests in a number of ways – such as the BMA’s fintech and insurance sandboxes, and also our work on the digital asset space.
From the perspective of insurance, the fact there are insurers on the island covering fintech risk and digital asset risk is a positive, and potentially will attract even more innovative insurers in the future. It bodes well.
Peter Hastie: What about the thorny subject of visas for overseas professionals? Are you making it easier for talent – and their families – to come to the island? After all, there was somewhat of a brain drain post-financial crisis in contrast to the more buoyant noughties…
Premier David Burt: This presents a classic tension, but I think we are, on balance, making it easier and we are being flexible. We want entrepreneurs, leaders and world-class businesspeople on the island. We have introduced a number of new schemes, including the popular Work From Bermuda visa, and have made it easier – where appropriate – for those individuals to gain permanent residence. We don’t want people leaving the island and taking their expertise away if there are opportunities for them here.
We’re also looking at what the future holds for Bermuda. When you look at what the pandemic has done, we need to transition to more of a residential [community], where we want more people living and working in Bermuda, and staying long term. So, revisions that have been made to our laws now allow international companies and others to make investments in properties [outside] the City of Hamilton. Which is something we’ve never done before. We want to retain people here to contribute to and grow our economy.
Ultimately, we are trying to reframe our relationship with international business – moving from a landlord/tenant relationship to a tenancy-in-common relationship. We all have joint objectives and interests in working together.
It is not just about visas and owning property. It manifests itself in other ways, as well. For example, 10 years ago, everyone on the island used to rightly complain about how bad the internet was. Now, people come to Bermuda from New York and say how good the internet is. We are one of the few countries in the world that have the capacity to deliver fibre optics to every single home. We even run fibre into the little islands in the Great Sound; even out there, they have capacity for fibre as well.
This is a real example of the incredible investments in our infrastructure we have made, which benefits business, benefits expats and benefits Bermudians.
Peter Hastie: Let’s change tack. Bermuda is the home of climate risk. Indeed, I saw a statistic recently that Lloyd’s share of the Florida cat market was a mere 6 percent – and 10 percent on a premium basis – compared to Bermuda, which is over 60 percent. That is an extraordinary difference. But I’m now hearing you are positioning Bermuda as the centre of climate risk finance. What does this mean?
Premier David Burt: It’s a work in progress and you should talk to our Minister for Finance when it’s launched, but what I can say is that it is an example of us innovating and also an example of us looking to build on our insurance strengths.
As you note, we are the experts in climate risk, so by extension, surely we are best placed to look at how it is financed? We’re dealing with companies that are collecting an incredible amount of capital that you want to make sure they can preserve or protect against losses they may have. If there’s funding in finance that may be available to make cities, countries, places resilient against the effects of climate which we know are going to happen, then I think that’s what it’s about. I think it’s a natural synergy for Bermuda.
If you’re holding $1bn of premium reserve to cover climate risk, but instead, you could allocate $200mn to make it less likely that you’re going to have to call on it [$1bn] then we all benefit.
So, we’re going to make a big push into it, we’re going to explore it – it’s early days but climate is an opportunity for us. Digital assets are an opportunity. Continued work with cyber is an opportunity. Because of the way Bermuda can pivot very quickly, we believe we can certainly benefit.
Peter Hastie: Returning to the digital asset space. There has been quite a lot of chatter about the potential new Jewel Bank. Is this kind of thing important to Bermuda?
Premier David Burt: Talking generally, Bermuda has been fortunate to be well served by our existing banks, but it’s no secret I think Bermuda can benefit from bank diversification. I recognise additional banks in the country offer digital options, digital competition on the domestic side, additional services and competition on the international side. From that perspective, any new bank setting up in Bermuda enjoys our full support if it abides by our regulations.
Regarding Jewel Bank, if they are successful in receiving a licence from the BMA, they will be welcomed with open arms. And I don’t think they’ll be the last. In the same way the government is determined to ensure we have banking for digital assets coming to Bermuda, so we are determined to launch a national digital bank. We believe strongly in the pressure of the digital economy and that in order for Bermuda to be successful long term, we have to be adequately and properly positioned.
I’m a big supporter of Jewel Bank, just like I’m a big supporter of any bank that wants to come to Bermuda. I believe in competition. From competition comes innovation, and from innovation comes lower costs and better service.
This benefits our local populace as well: reduced transaction costs, reduced friction inside the economy, more ability for our locals to connect with the world. It’s small things as well. An entrepreneur in Bermuda can’t set up a PayPal account. I don’t want any of our entrepreneurs disadvantaged.
Peter Hastie: So, the message is Bermuda is open for business, big or small?
Premier Burt: There are those that say my party is not the natural ally of business. The reality is different. The fact is, our stewardship of the economy – not only during the pandemic, but prior to the pandemic – our commitment to strong regulation and to innovating and infrastructure has given businesses the confidence to succeed and invest in the island.
When you have people like Stephen Catlin setting up Convex, it shows the confidence business has in the island. And there are others who are coming to the island who I can’t even talk about yet. Whether they’re in the digital asset space or the insurance space, there is momentum and we’re going to continue to capitalise on the momentum.
Peter Hastie: Protectionism and populism is a global trend. Is Bermuda immune to its temptations?
Premier Burt: It’s difficult, because the natural mindset of any small country is protectionism. But protectionism in a globalised society and a globalised economy like ours is a recipe for long-term disaster. Competition makes your economy more efficient, a more efficient economy produces economic growth, economic growth creates prosperity and jobs, and that’s the cycle I am determined to pursue.
It’s not just words. Before I came to office, international law firms were not allowed to set up in Bermuda.
Peter Hastie: A nice arrangement for some!
Premier David Burt: It was. As you can imagine, it was not an easy situation to address. But we consulted and considered, and I think the ultimate outcome has been positive. There is more competition, but firms have also got larger. They have attracted more talent and more business onto the island.
Peter Hastie: So, ultimately, you’re pleased with where Bermuda is positioned after the pandemic pain of 2020–21?
Premier David Burt: Politicians, as you know, are very rarely content, but I am satisfied I have an incredible team of people who have worked and continue to work to make Bermuda a great place to do business. What we’ve been able to accomplish as a small country over this time has been incredible and, yes, I’m optimistic about the future.
Optimistic for Bermudians and for business that makes Bermuda home.
The Insurer’s managing editor Peter Hastie interviewed Premier Burt on 11 March 2021