Anyone who says it’s not possible to build a global business empire after starting out in tiny Bermuda should take a look at Ace Ltd. Last week’s announcement that the company had agreed to buy the American insurance powerhouse Chubb in a mind-bogglingly massive $28 billion deal was the latest chapter in a remarkable success story.

Ace’s market capitalisation is around $34 billion — that’s more than six times the size of Bermuda’s economy — and with the new acquisition will be much larger still.

It seems that Evan Greenberg, the chairman and chief executive officer who for several years worked out of Bermuda, is following in the footsteps of his father Maurice “Hank” Greenberg, who built up American International Group into a global behemoth during its heyday.

Ace has long since outgrown its Bermuda roots, is now headquartered in Switzerland, and has operations in more than 50 countries. The Ace name will eventually disappear as the combined company intends to take on the 180-year-old Chubb brand instead. However, the company will continue to be a significant employer on the Island and Bermuda can reflect with pride on the astonishing progress made by the company founded here 30 years ago as American Casualty Excess.

Lessons learned from the firm’s formation remain relevant to the Island today.

In 1985, there was a global liability insurance crisis. Huge court awards against corporations and large settlements drove many insurers to stop offering some types of insurance or cease writing liability coverage altogether. The Ace project, masterminded by Bob Clements of insurance broker Marsh, represented an innovative solution to a global problem. The company was initially funded by 34 of America’s largest corporations, who were the company’s first customers.

The company raised $400 million in capital, but then chose to incorporate in the Cayman Islands, because of the comparatively high stamp duty costs in Bermuda. However, the company’s operating headquarters was established in Bermuda and, according to Mr Clements, the location decision was not made for tax reasons.

Catherine Duffy, in her book, Held Captive: A History of International Insurance in Bermuda, cites an interview with Mr Clements, in which he said that with a US domicile, it would have taken years to gain permission for the new policy form Ace wanted to use. The need for the insurance was acute and urgent, Bermuda could create the necessary regulatory framework rapidly and hence came the decision to domicile offshore.

Insurance has grown into Bermuda’s biggest industry and is the mainstay of the international business sector. But the consolidation sweeping the industry, of which the Ace-Chubb deal is the latest and largest example, means we can no longer rely so heavily on insurance as our economy’s job-creating and growth-driving locomotive. As merging companies streamline their operations and cut out duplication, jobs will be lost, adding to the number of unemployed Bermudians. Some expatriate workers will also leave, meaning their housing allowances and local spending will be lost to the already struggling economy.

By the time the merger mania has played out, we will probably be able to count the negative impact on the economy in the tens of millions of dollars, a heavy burden for a community trying desperately to free itself from a recession that has already spanned six years.

As the Bermuda Chamber of Commerce stated last month, after the latest employment statistics showed about 800 jobs were lost last year, the need to diversify the economy is urgent. We can no longer rely on a wave of new insurance companies to come here after every major disaster, as catastrophe bonds rather than start-ups may be able to rapidly replace depleted reinsurance capital.

So why are the lessons learned from Ace’s birth relevant to today’s situation?

Just as it was in 1985, Bermuda needs to be ready to welcome innovators aiming to meet global needs, and be ready to tear away the red tape that would strangle their fledgling solutions in larger countries. The next company to build a global empire from Bermuda roots might be a financial technology start-up or a biotech company.

In a country with an ageing population and a low birth rate, with no exports to speak of and a Government weighed down by debt, it’s difficult to dispute the argument that our future economic prosperity relies on attracting smart people and capital from overseas.

More red carpet and less red tape, as the saying goes, is key to our chances of success.