The need to succeed
Let’s have a little insurance regulatory quiz. I’ll start you off with an easy one.
Who said this?
“The global financial services market is highly competitive and companies will seek to use a variety of elements to support their business objectives at any given time. That includes the choice of domicile”
Why is this so easy? This is because there are only a handful of places in the world where anyone would say such a thing. Forget the other 319 possible jurisdictions, since we are probably talking about global insurance, we already know instinctively that the person who said this is based in Bermuda.
Bermuda is one of only a select few places that realises that if you transact global business, you have the whole world as a potential choice of domicile from which to organise and execute that business.
The first step on the road to success is the identification of what it is you will need to do to succeed.
This is why Bermuda is already a long way ahead of most other places.
Most don’t get past first base because they are blinded by already having large domestic markets of their own to regulate. Not so Bermuda, a territory with a population of 62,000 and therefore the home insurance market of a small city in a G7 economy.
In the global insurance kingdom of the relatively blind, Bermuda has both its eyes wide open and these are fixed on building an empire consisting of the cross-border insurance businesses of the future.
It has already captured strong positions in all the progressive global insurance structures of the last 50 years. Captives, excess global specialty insurance, property cat reinsurance and insurance-linked securities have all brought success and prosperity.
The second driver of success is the motive. You may know how to succeed but without the drive and desire, you don’t get anywhere.
Bermuda is more likely to succeed than most because it has a genuine incentive to do so. In a small place like Bermuda even success on a relatively small scale can make a huge measurable difference.
A couple of new employers re-domicile and the economy is boosted significantly. When it comes, success is palpable and the rewards are visible, and experienced quickly.
The only problem Bermuda has ever had is the capacity to absorb an excess of success. Back in the 2006 post KRW boom, these strains were visible, as bottlenecks in housing and office space heightened tensions over immigration.
The aftermath of the global financial crisis eased these pain points out naturally and shortage turned to surplus.
Today Bermuda’s population is still almost 5% percent below that of its 2009 peak.
So, it has room to grow and it has the appetite, the incentive and a plan to do so.
But even better for the world is that Bermuda’s motives are born of necessity. Bermuda really needs to succeed in this sphere.
It is not a big place and cannot simply get by on its domestic economy and natural resources as so many large nations do. It is a charming, hospitable and attractive place to visit, but does not have any specific competitive advantage in tourism where tropical Caribbean island rivals can boast better weather, readily available land for development and much lower unit costs.
This is why it is absolutely imperative that it focuses on far higher added value activities. It does not have an alternative.
So, here’s the answer to the quiz question. The words from the beginning of this article came from the Bermuda Premier, David Burt presenting the launch of his government’s insurtech regulatory sandbox regime to Parliament in 2018.
Other places including the UK already had sandboxes open for play at the time, but Bermuda went ahead because it believed it could be a competitive choice in particular areas.
It is obvious that the island cannot be the domicile of choice for a consumer insurance business but in a fully digital world where insurance risk will be traded and swapped automatically, it could provide the perfect venue for such exchanges, particularly at the wholesale intersection between capital markets and insurance.
Bermuda thrives in environments where sophisticated counterparties want to deal with one another with effective and credible, but appropriate, levels of supervision.
Exchange-like insurtech businesses such as Akinova have grasped this quickly and availed themselves of the island’s regulatory regime.
The tech-enabled world means anyone can do almost anything from almost anywhere.
Given its track record to date and its hunger for success, it is a safe bet that many of the most radical insurance structures of the coming years are likely to be built, maintained and supervised on the island of Bermuda.