Bermuda has done well to weather the financial storm and and is on course to adapt to the changes it will face in the future.

That is the view of Matthew Elderfield, who was speaking yesterday at one of his last public events - the Hamilton Rotary Club at the Royal Amateur Dinghy Club - before he steps down down from his post as CEO<\p>of the Bermuda Monetary<\p>Authority (BMA) to take up his new role as Central Bank of Ireland's director of financial regulation next year.

Mr. Elderfield talked about the impact of the financial crisis on Bermuda and the future implications for the Island, starting proceedings with a quote from Lord Adair Turner, chairman of the Financial Services Authority in the UK, who said: "It is important to recognise that the role of the offshore centres was not central in the origins of the current crisis."

He said the financial crisis was mainly an on-shore banking issue which started with the sub-prime losses, followed by the disruption to the interbank market, the near catastrophic loss of confidence in the banking system and the subsequent government intervention, dramatic falls in most indices and a severe disruption in the real economy with an knock-on effect on unemployment - all of which took their toll on Bermuda and will continue to do so.

"There will be far-reaching implictions for Bermuda as there are fundamental changes proposed to international regulatory standards," he said.

Mr. Elderfield said the BMA had taken a proactive stance to managing the impact of the downturn on the Island from the outset, being one of the world's first regulators to carry out surveys of firms to find out their sub-prime exposures, which were completed in<\p>August 2007. They revealed that only financial guaranty companies were significantly at risk, and the BMA worked with them to help them meet their financial commitments.

The Authority intensified supervision of all sectors as the crisis deepened, in the form of specialised market surveys, stress testing of banks and enhanced monitoring of the areas most affected, he added.

"Bermuda insurers, in common with insurers worldwide, experienced challenges to their investment portfolios, particularly in the last two quarters of 2008, when we witnessed unprecedented volatility in the market," he said.

"Despite these challenges, Bermuda insurers have been resilient. Indeed, the most recent round of results announcements from the market have been largely encouraging, reflecting a return to more positive trends."

>But Mr.Elderfield said there was one exception to the rule, with the BMA being forced to take action against the Bermuda branch of British American Insurance Co. to support its health policyholders with help from Government and the Argus Group, ring-fencing its assets to a greater level than required by legislation, while discussions are underway to assist life policyholders.

He said that the Island's banks had remained resilient, maintaining compliance with the Authority's capital standards, with heightened supervision of the sector given the potential exposure to banks worldwide to the effects of the crisis, including the requirement for a capital buffer for all banks. "Although we are seeing encouraging signs of recovery in major economies around the world, we are not out of the woods yet and can expect that the banking sector will have further challenges to face," he said.

"However, with the capital buffer in place, Bermuda banks are in a strong position to absorb any future losses, which are to be expected as the downturn continues."

Mr.Elderfield said that Bermuda's fund industry had also suffered a difficult time, again consistent with prevailing trends globally, with a reduction in net asset values through increased redemptions and market movements.

However, he added that the Island's regulatory framework for funds compared favourably with onshore financial centres, due to the condition of separation of fund administrators and custodians.

Mr.<\p>Elderfield said one of the main lessons learnt from the crisis was that financial regulation had not kept pace with the growing complexities of the markets they work in, while there was a post mortem underway by the likes of the Group of 20, the Financial Stability Board and the International Association of Insurance Supervisors to revamp global standards, as well as reforms in the US.

He said the Island's insurance regulations were well-placed for such developments due to the BMA's work in preparing for regulatory equivalence or mutual recognition under Europe's Solvency II Directive, while on the banking front, institutions were well set for the Basel Committee for Banking Supervision's bid to raise global standards.