January 30, 2013 at 5:54 p.m.
Special report / The Cayman Islands target Bermuda
The Cayman factor
WEDNESDAY, JAN. 11: Reinsurance is the lifeblood of our international business sector, its trickle-down benefits felt by every islander. We’re a world leader but there are competitors nipping at our heels; most notably of late, the Cayman Islands.
Last month, Cayman Islands Premier McKeeva Bush announced a new strategy targeted specifically at luring reinsurance business away from Bermuda. It will include new legislation, a direct marketing campaign and immigration incentives.
Industry sources agree that Bermuda is well ahead of the game and some say the Cayman ‘threat’ is tenuous at best.
But the issue raises bigger questions about whether or not are we doing enough, in an increasingly competitive offshore arena, to protect our international business. If you were setting up an offshore company and had to choose between Bermuda and Cayman, what would sway you?
In exploring the issue we have highlighted some fascinating similarities — and contrasts — between Cayman and Bermuda.
Bermuda or Cayman? Both are British Overseas Dependent Territories and major world financial centres.
Both employ large expatriate populations and have expanded term limits on work permits from six and seven years respectively to 10 years for job creators.
Both have pleasant climates and are grappling with a spike in violent, gang-related crime and unprecedented levels of unemployment.
And both have their eyes on new reinsurance business — though Bermuda is streets ahead in this arena, much as Cayman dominates the hedge fund industry. But what are the advantages and disadvantages for each country as they try to attract international business at a time of global economic uncertainly?
You should care — your livelihood might just depend on Bermuda getting it right.
Pros and cons: Cayman
The Cayman Islands has much to offer an expatriate trying to choose between job offers in Bermuda and Cayman, says Clayton Price, chairman of the Insurance Managers Association of Cayman. He cites three key selling points: “One — the quality of life you can achieve here. It’s a very open market in terms of freedom to buy properties.
“Two — there is a more efficient stamp duty here (seven per cent) and three — you can buy more than one car.
“You get a feeling from Government of welcoming and embracing international business. The Government here is making it very attractive with regard to the insurance sector setting up business.”
Mr Price said there is no minimum ARV price point if expatriates wish to purchase a home or condo. Home purchase is encouraged as it forms a key part of a points system for those seeking Caymanian status.
He said the recent announcement of 10-year work permits for reinsurance executives with the title of vice president or above is a step in the right direction. But if were up to him, he would take it a step further and declare that anyone who is a ‘chief’ — chief executive office, chief financial officer, chief accounting officer — “should be told ‘stay as long as you want’ because that’s where you get stability built in.”
Generally, setting up shop in Cayman is cheaper in Cayman than in Bermuda.
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 Cayman enjoys success in attracting business from western Canada and the gulf part of the US up the Mississippi River to Chicago. Cayman has business lines that make it attractive for industries like banking or hedge funds.
Mr Campbell said two issues, which are also of concern to Bermudians — crime and the prevalance of expatriate workers — seem to be having a far greater impact in Cayman.
“Increased gang/drug related crime activity is seriously challenging the natural civility of the islands and increased political pressure from the US and the EU countries to claw back taxes… are also threatening the acceptability of both jurisdictions.”
Mr Campbell said even though people here feel upset about expats, in Caymans it is worse.
“In Cayman, the disillusionment by Caymanians about offshore persons is way, way stronger. The Caymanian people don’t fully understand their cultural imperative as strong as we have in Bermuda — things that are important to us and that we strive to maintain. On Cayman I’ve seen a heightened level of anxiety among locals and expats alike about the crime situation. It’s becoming more uneasy by the day and something has to happen to get these young people back into society.”
Then there are immigration tensions: “Cayman makes you reapply for your work permit ever year. That’s going to give you an anxiety attack throughout the year. It takes a long time for the permits to get through. You’re halfway through your year of waiting for your permit and then you have to start the process all over again in a couple of months.”
Pros and cons: Bermuda
Geography, a well-regulated reinsurance industry and having some of the best minds in the business are touted as advantages Bermuda has in attracting and keeping offshore business.
Brad Kading, president of the Association of Bermuda Insurers and Reinsurers said: “Bermuda has a geographic advantage over Cayman by being closer to the major east coast cities and to London. It’s not enough on its own to win in the captive game, but it is advantageous.”
Colin Campbell said: “The strength for Bermuda is and has been, the people who create new products and create new investment opportunities for reinsurance have largely been found in Bermuda.
“They create their own alchemy and get things done. In any industry, like reinsurance, it’s important to have them close together, as close as possible.” Perhaps a bigger threat to Bermuda, he said, is the “disillusionment” of the reinsurance industry leaders here with current government policies.
Ms Packwood, CEO of Bermuda Business said Bermuda has much to be proud of: “The insurance and reinsurance business requires a sound regulatory framework and experienced regulators, capital and experienced executives who understand finance, risk and have the ability to develop products and services that preserve and protect value for their clients. Bermuda has all of this and it’s established and proven over decades. Simply put, you cannot wake-up and say that one is better for reinsurance when there is no substance or experience to prove such an assertion.
“One need only look at the continued growth of the Bermuda insurance and reinsurance business last year in what was a terrible global economy to understand Bermuda’s position.”
Economist Bob Stewart said Bermuda has several coveted attributes: Low taxation, a lack of corruption, a liberal immigration policy, a good education system, an incorruptible legal system and economic freedom. But they are “being undermined bit by bit” he added, by government policies like six-year term limits.
“I’ve lost count of the number of people who said to me, ‘we’re going and we’re taking our jobs with us. Not only that, they’re taking a whole bunch of other jobs with them. They’ll no longer have a Bermudian gardener, for instance.
“If anyone wanted to commit suicide in an economic sense, the immigration policy that Bermuda implemented was the perfect weapon.”
Comments:
You must login to comment.