Richards sees signs that recession is over
The recession is over, Finance Minister Bob Richards told a high-profile gathering of leaders in the captive insurance industry.
Mr Richards told delegates: “The six-year recession we’ve all had to endure, I think that’s over.
“But I think we have to make sure we don’t count chickens before they’ve hatched.”
Mr Richards cautioned that the “embryonic recovery” needed to be nurtured.
But he said recent consecutive increases in the retail sales index pointed to the slump having bottomed out.
He added: “It’s been a long tough road. We have a lot of stats that are put out by Government, but I believe the stats that are most important are the retail sales.
“Bermuda is a pretty simple economy — not a lot of sectors, no manufacturing, so retail sales tells a bigger story than most of the statistical series.”
Mr Richards was one of the guest speakers at the Bermuda Captive Conference, which is taking place at the Fairmont Southampton and continues today and tomorrow.
The Minister spoke during a round table discussion on market and business trends worldwide, together with Bermuda Monetary Authority CEO Jeremy Cox, Brad Keating, the president of the Association of Bermuda Insurers and Reinsurers and Robert Vermes, CEO and founder of Captive Advantage LLC and president of the Bermuda Captive Owners Association.
“The breakdown in retail sales has been uneven — we would expect that, but it’s an indication of a lot of things going on. Ultimately, the drivers of the Bermuda economy are progressing — but under a headwind,” said Mr Richards.
And he added that outside factors, like mergers and acquisitions in the insurance and reinsurance sector, had impacted the number of jobs on the Island, while Bermuda still had to turn around the tourism market and improve the hotel offering.
But Mr Richards said: “I believe we have identified the factors responsible for this decline and we are addressing them.”
He said that hotel investments were “big decisions and took a lot of belief”, and added: “We didn’t have that for a long time and I believe we are getting that now.”
And Mr Richards said that there was “an overlap between international business and tourism and we have to exploit that for all of us.”
He told delegates that US interest rates were likely to rise “in the relatively near future”.
He said: “The pace at which interest rates do rise and if we look at the telegraphing, particularly by the Federal Reserve, is really crucial. If markets are taken by surprise by this ... but I expect interest rate rises to be so gradual and so telegraphed, everybody will know it’s coming.”
Mr Vermes added that, although an increase in interest rates would affect captives, the impact would be “smaller than in other areas.”
He said: “This is going to be a very cautious, slow, methodical sort of rise. Considering what’s going on in Europe, it could be devastating to the economy.”
Mr Kading added there was “confidence in the legal system and confidence in Bermuda as a jurisdiction.”
But he added that the rate of convergence between traditional models in the insurance and reinsurance industry and the flood of new capital through instruments like insurance linked securities (ILS) would not slow.
Mr Kading said: “This is a fundamental shift in how this is written. We consider ourselves converged.”
The conference was officially opened by Premier Michael Dunkley, who said that investor confidence in Bermuda was growing.
He added: “In a domicile known for its innovation and capital strength, the merger and acquisition environment, we believe, will strengthen even further the Island’s standing as a major international market.
“The greater capital, together with cost savings and synergies, will make the combined companies stronger and more competitive.”
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