January 30, 2013 at 5:54 p.m.
The Cayman Factor / Context
Does Cayman pose a formidable threat to Bermuda?
WEDNESDAY, JAN. 11: It’s an irritant, like a fly that lands on your forehead.
Bob Stewart used this simple analogy to assess the ‘threat’ posed by the Cayman Islands to Bermuda's international business sector.
“Business doesn’t get lured away,” he told us. “Business goes to a place and stays at a place because of the advantages that accrue to that business.
“It’s not like a whorehouse where you’re with a good looking girl and you see a prettier girl and think ‘Gee, I’d like to go with her.’ Business doesn’t operate like that.”
The economist and author says “the real competition” is coming from bureaucratic organizations like the OECD and “politicians seeking to put the stranglehold on Bermuda.
“The competition (from Cayman) is a bit like an irritant, like a fly in the summer landing on your forehead. The real competition is somebody who can deal you a body blow like the OECD.”
Brad Kading, president of the Association the Bermuda Insurers and Reinsurers (ABIR) said Cayman does not have a strong case if they are attempting to muscle in on Bermuda’s active reinsurance business — companies like ACE and PartnerRe.
The Bermuda Monetary Authority has done “an extraordinary job”, he said, of keeping us ahead of the game by of meeting and exceeding international standards.
Bermuda and Switzerland, he pointed out, are the only two countries outside the EU attempting to meet Solvency II regulatory requirements.
“That’s critical because if that isn’t done then the companies have penalties imposed on them. Cayman hasn’t made any move in that direction. They don’t have any case to make in that sector.”
Colin Campbell, regional director for OBM International, which has offices in both Bermuda and Cayman as well as the US, Antigua, BVI, Spain and Trinidad, said notion of Cayman “poaching” Bermuda’s reinsurance business is a stretch: “I always thought Cayman and Bermuda provided complementary services. Ireland, Isle of Man and Switzerland (and US/Canada) are our bigger concerns.”
He added that if Cayman had a strong case the reinsurers would be there already.
Mr Stewart, who has been a director of a Cayman company and has been travelling to the island for over 40 years, also downplayed the threat. He is more concerned about what he sees as the detrimental effect of our current government’s policies in areas such as immigration. He suggests Government has lost the confidence of business leaders “who are too polite and too diplomatic to say ‘you guys have screwed things up’. They just back their bags and go or reduce their activities her and parcel them out elsewhere in the world.”
Clayton Price, chairman of the Insurance Managers Association of Cayman, said Bermuda and Cayman share more of a symbiotic relationship than a competitive one.
He said that while Cayman is very interested in seeking reinsurance business, it’s of a different kind to that which Bermuda is going after.
A new legislative framework is being put in place along with immigration incentives.
“Cayman will probably see some benefit by putting those measures into place,” Mr Price said, while conceding that Bermuda’s adherence to Solvency II will be a distinguishing factor. He explained that commercial reinsurers looking to have eventually have a platform in the European territory as well will “no doubt” continue to be drawn to Bermuda. “Cayman will probably be better focused on having a reinsurer who is really not looking to Europe, but is more likely to seek a Far East or North American platform.
“It’s a totally different market that you typically see come to Bermuda.”
Bermuda’s competition is the world, not Cayman, says Mr Stewart. “As the rest of the world does foolish things like high taxation or tight regulation or is full of corruption or incompetent banks, then places like Bermuda look good.”
Craig Simmons says that ultimately, it’s all about money. “We live in a global economy... The rest of the world doesn’t care about our baggage of income and wealth disparity.
“If we are unable to provide the services that reinsurers want at a competitive price, then someone else will. When it comes down to it, it’s us (Bermuda residents) against the rest of the world.”
What do you think? E-mail feedback on our special feature on the Cayman Islands to editor Tony McWilliam: [email protected].
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