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(Bloomberg) - "XL Capital Ltd., the biggest Bermuda- based insurer by assets, is seeking a buyer after reporting investment losses larger than its market value, four people with knowledge of the matter said."

With that lead-in, there comes, for the first time, stark evidence of the new Bermuda reality stemming from the shift in Bermuda's economy. That shift was from the labour based Tourist Industry to the knowledge based Insurance and Financial Services Industry. From an industry that relied almost entirely on the uniquely Bermudian human qualities that showed through our Bermudian community, to an industry in which Bermudians are simply service providers to an industry that does not need or require the kind of human interaction on which the Tourist Industry depended.

The Tourist Industry was locality based. Bermuda's beaches, Bermuda's turquoise waters, our food service, our Bermudian entertainment, were all vitally important to Bermuda's Tourist Industry. The only way that the Tourist Industry could disappear was by tourists not coming - which began happening in 1988.

But even without tourists, the actual physical plant - the hotels, guest houses, beaches, turquoise waters - would still remain; as would the Bermudians who served in those physical plants and who provided all the other ancillary and supporting services that made Bermuda Tourism viable, attractive, and profitable.

But the XL situation demonstrates the stark new reality.

Insurance companies and International Business generally are actually bundles of files -now held on computer hard-drives or discs. They are intellectual capital and experience - sitting in the brains of actuaries, underwriters, brokers. They are supporting intellectual skills - sitting, once again, in the experience and brains of accountants, lawyers, and fund managers. Insurance companies and International Business are not dependent on the placement of physical plants nor are they dependent on the lifestyle or human ambience of the community in which they choose to locate.

Rocky patch

Unlike a hotel operation, an insurance company can pack up completely and fly away from Bermuda with the same easy speed with which a common sparrow hops into the air and flies off to its unnoticed new destination. A destination important to the sparrow, but unimportant and unknown to us.

In today's wild global economic downriver run, XL has hit a rocky patch. In this regard, XL is no different than GMC, Ford, Chrysler, Lehman Bros, Bear Stearns, Washington Mutual, Northern Rock, etc....  All of these behemoths hit the rocks. Some got splattered. Some are struggling and may yet go under. One or two may still be around when the river runs smoother.

XL may be bought by another Bermuda Re-Insurer; or a consortium of Bermuda Re-Insurers; or an investor group from somewhere else - Russia? the Middle East? Europe?  Africa? India? Or XL may not be bought at all, and may struggle back to success. Or XL may be broken up and sold off piecemeal.

For us lot at 32N64W, this beginning of this XL episode provides a clear example of just how much and how far Bermuda's economy has shifted. How much real change has actually occurred.

XL can be whisked away from these shores. Through it all, us lot will be mere bystanders. Nothing that we do - smiling more, serving drinks faster, entertaining better, even dyeing our waters a deeper turquoise - will make any difference to the hardheaded men (and women) who first calculate and then make financial decisions. Us lot are like the sparrows that we tend not to see. Us lot don't matter and we don't really figure in their calculations.

As this XL situation unfolds, as grey men in grey suits consult grey calculators and look for black bottom lines; us lot at 32N64W should use our grey matter and study and learn about this new but very real Bermuda economic world that, years ago, overtook the "another world" that our national bard Hubert Smith used to sing about.

Bermuda has changed. Bermudians need to recognize that change. Bermudians must shift some current Bermudian mindsets. And then - from the top of government right down to the man-in-the-street, all Bermudians need to start acting and behaving differently - very differently.

In this changed and much harsher national and international environment, us lot have to look out - far better than before - for ourselves; and to do that we need a far better understanding of what - in 2008 - Bermuda really is.

For the past while there's been excessive concentration on a passed past; and inadequate thinking about the present and the future.

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