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Premier upbeat on `inversions'

Premier Jennifer Smith told members of the Mealey's Insurance and Re-Insurance Roundtable Forum in Arizona that the criticism of Bermuda over corporate inversions was "well over the top".

As the keynote speaker last Thursday, she told members that one of the major challenges faced by the Island in the last couple of years had come from the proposed Patriot Tax Act in the US - which bids to persuade American companies not to incorporate overseas.

She said: "Unfortunately, the Patriot Tax Act fuelled accusations and confusion... all a matter of some concern to a legitimate international financial jurisdiction like Bermuda.

"You may recall, that the crux of the problem was "corporate inversions" - although the Act and inversions are two separate issues. To neutralise hostility toward international financial jurisdictions, even those with impeccable standards like Bermuda, we long ago adopted a policy of economic diplomacy in partnership with our international business leaders.

"It is gratifying that as a result, informed persons have now come to realise that the criticism over corporate inversions was, in Bermuda's case at least, well over the top. Some are also beginning to understand that the problem lies not offshore, but within."

The Premier told members of the conference that by registering in an international financial jurisdiction, US companies could, under the US tax code, legally reduce their taxes on income derived from their foreign operations. But she said resident international companies in Bermuda was not new. And, in fact, she said the practise dated back to the Second World War.

She added: "Businesses come to Bermuda because of our good reputation. Because of our standard of education, our quality of life, our political and economic stability and our infrastructure, including good telecommunications.

"And, I submit, because our country's integrity is a reflection of their own self-worth. Bermuda's exemplary conduct as an international financial jurisdiction is unrivalled.

"Our monitoring, supervision and regulatory regime are above reproach. And we steadfastly support every effort to clamp down on illegitimate activity."

She said the members may have been interested to learn of the recently concluded International Monetary Fund (IMF) assessment visit to Bermuda.

The purpose of the visit was to assess the strengths and weaknesses of Bermuda's financial regulatory and supervisory arrangements, including the anti-money laundering framework and enforcement provisions.

On March 28th a two-volume draft report was presented. Although the report has not yet been finalised, the Premier said she could say IMF team was impressed with many aspects of Bermuda's regulatory and supervisory arrangements.

But she said, of course, there was always room for improvement and Government would be carefully reviewing the detailed report to assess any recommendations for such improvement.

And the Premier said Bermuda's reputation was maintained and enhanced through co-operation between the public and private sector and between Government and international business.

She added: "There are in the region of 15,000 companies registered in Bermuda, and between 80 to 90 percent of these are international entities.

"Those that put down roots of the bricks and mortar variety - do so because of our standard of education, our quality of life, our political and economic stability, our world class infrastructure, and our cutting edge telecommunications."

And she said since 1986, Bermuda had had a Tax Treaty with the United States, which facilitated the sharing of information to fight money-laundering and harmful tax practices. That Treaty was now being considered, she said, by the Organisation for Economic Co-operation and Development (OECD) as a model for similar treaties between member countries and other jurisdictions. "It is ironic that, The Patriot Act introduced `know your customer' standards with which key financial sectors must abide to minimise potential wrongdoing by clients," went on the Premier.

"Such standards have been in place in Bermuda since World War II, but were formalised in legislation in 1997, through our Proceeds of Crime Act and other regulations. In fact, all of our key financial service sectors have applied these stringent standards for many years."

However, within the international business sector on the Island, she said the insurance industry was Bermuda's dominant economic force, with assets of an estimated $164 billion; aggregate capital and surplus of more than $60 billion; and annual gross premiums of roughly $48 billion.

The Premier said only the US was reported to have more insurers than the twelve Bermuda insurers with over one billion dollars in capital and surplus.

And she said of the just over 1,600 registered insurance and reinsurance companies, about 80 per cent were captives.

But she said despite that, what was generally not recognised outside the insurance fraternity was that Bermuda ranked right along with London and New York as one of the top three insurance centres in the world. And she said it managed to be such a leading global player through influence. Ms Smith said since September 11, 2001 some had said that the inherent strength of the insurance companies in Bermuda had contributed greatly to the stability of the insurance market because they were not overly exposed to liabilities.

She added: "Bermuda companies invested heavily in Lloyds' recovery. We have been a critical player in the market's financial recovery by returning lost capacity to the insurance industry. And Bermuda's insurance companies provided assistance to the United States insurance market by making significant investments of much needed capital. Thus, tiny Bermuda contributed to the stability of the global market."

And she said with integrity as an imperative, Government intended to do all it could to assist businesses to meet the extraordinary challenges that continued to confront them.

She added: "We intend to continue our policy of economic diplomacy and proactive co-operation with regulatory bodies, like the International Monetary Fund and the OECD, while protecting the conditions that allow our international business sector the flexibility needed to be innovative and creative. Bermuda may be small, but we are large in worth and in value."