Bermuda Monetary Authority head Cheryl Ann Lister does not expect New York Attorney General Eliot Spitzer?s probe into insurance industry practices to impact Bermuda any more than any other jurisdiction where insurers and reinsurers operate.

On November 16, Mr. Spitzer testified before the Subcommittee on Financial Management, the Budget and International Security oversight hearing on insurance brokerage practices. He told the subcommittee that an inquiry into the massive insurance flow to offshore venues would be among the ?discreet areas? where congressional inquiry would be useful.

He said: ?Why is it that suddenly Bermuda is the home to so many insurance carriers, reinsurance carriers brokers? Why have we seen such massive capital outflow from the US where there is regulatory authority for the states to exercise to venues where the insurance and reinsurance carriers and brokers intentionally secrete themselves in ways and in areas that we cannot inquire into. There is a Pandora?s box that should be opened so that we can understand what is going on in these offshore venues. It will not be a pretty picture.?

Mrs. Lister however dismissed the specific nature of Mr. Spitzer?s comments.

?Bermuda has been the flavour of the day and at the end of the day we have been successful as a jurisdiction getting a very vibrant successful insurance industry here,? she said. ?Bermuda?s name was used but I do not see that the issues relate specifically, that whatever he was discussing are just Bermuda issues. We operate in a global marketplace so if there are any issues that ultimately come out of this they are issues that will affect reinsurers more generally not just the Bermuda ones.?

She said that the BMA had countered such negative comments about Bermuda by explaining the Island?s regulatory scheme through such venues as the Bermuda Briefing. The BMA has also taken the same stance as the Financial Services Authority (FSA).

?If specific institutions have been named we have been in contact with them and we are working very closely to determine exactly what has happened ? whether or not in fact any Bermuda entities have done anything which we need to take regulatory action about,? she said.

She added that a lot of the entities have US arms and the issue may just be something for the US arm and not necessarily something that the Bermuda operation can take regulatory action on.

?It just depends on what has been done in terms of the Bermuda licensed entity so we are working very closely with a lot of those and have had ongoing contact and continue to have ongoing contact to make sure that we?re well briefed on what is happening in the US, what these firms are providing etc. so we in turn can determine if at any point we actually do need to go in to take regulatory action.?

In the new year, the BMA will roll out an enhanced ?revised, revamped and upgraded risk assessment model? to help determine even more effectively when a company needs more oversight.

Mrs. Lister said that the BMA was well equipped to oversee the entire insurance industry based on the Island.

?People look at the big numbers and say 1,600 companies, how can you manage that with the size of staff etc that you have. People forget a couple things. One, most of those companies are captives which are just self-insuring the risk of the parent and therefore it is the parent company. The risk to the marketplace is very different and so what we have in place is a risk based system.?

As for regulation itself however, Mrs. Lister pointed out that it it largely dependent on each company?s board of directors.

?The reality is that insurance has been supervised, a lot of that stuff has been supervised in the US and wasn?t caught in the US,? she said. ?A lot of times when things go wrong people think the regulatory bodies should catch all this. The reality is that you have to set the standards and then put all the checks and balances in place, but ultimately the onus on making sure they are complying with the legislation and they are operating the companies appropriately has to be with the board of directors. They have to be held accountable as well. That doesn?t mean the regulatory body shouldn?t be aware of what the risks are and how well they are being managed. That is something we are all looking at as regulators. How do we do that better than maybe it has been done in the past??

Mrs. Lister said these challenges were not unique to Bermuda, but are being faced by regulators world-wide.

She said: ?No matter how effective a regulatory body is, it doesn?t guarantee that they will prevent failure, but what you want to do is minimise it. At the end of the day sometimes a company will just fail because you get people who are not ethical or not competent or whatever and it is like saying should an audit firm always be able to pick up fraud. Well, no, the reality is that if you assume every firm that there is fraud being committed in that company nobody could ever pay for the cost of an audit and the same thing is true in supervision. You have to assume that at the end of the day you put in all the various checks and balances, you make the board, you make all the various parties, you have all the supporting services, but there is no guarantee that people will not do things that are illegal and when they do you deal with them.?