No punches were thrown but the insurance market rivalry between Lloyds of London and Bermuda was given a going over by a number of key speakers at the inaugural Insurance Day Summit in Bermuda.

With a handful of Lloyds of London names having embraced Bermuda in recent years, and capital from Bermuda finding its way back to the London market, the question of who is best was considered on the first day of the high-powered summit, opened by Acting Premier and Finance Minister Paula Cox at the Fairmont Hamilton Princess Hotel.

It is eight years since property and casualty insurer and reinsurer Catlin Group moved to Bermuda, to be followed over the years by a number of other London outfits; Amlin, Hiscox, Omega and Kiln.

Company chairman Stephen Catlin said the two main reasons for the shift was the tax advantage Bermuda offers and the state of regulation in the UK at the time, which he noted had since changed radically for the better.

"The FSA (Financial Services Authority) was not (then) principle-based. I was uncomfortable with the UK regulator," he told delegates.

Mr Catlin then contrasted the advantages and disadvantages of the two insurance markets of Lloyds of London and Bermuda.

"Lloyds has one of the most robust brand names in the world. People continue to buy the Lloyds product after 300 years. It is surprising the brand should be so robust considering the calamities of the past 35 years," he noted.

"It is the best-known insurance brand in the world. It writes a very diverse range of business, insurance and reinsurance. Lloyds and London is the only true subscription market. Lloyds has a very well respected regulatory regime and that's a change over the last 15 years."

Mr. Catlin said he was happy to see that the Bermuda Monetary Authority was also going down the "principled-based" regulation road taken by the FSA in the UK.

He also noted that Bermuda would never be able to compete with the sheer concentration of "40,000 to 45,000 people involved in insurance and reinsurance in the Square Mile area of London."

Of Lloyds of London's disadvantages he said: "The disadvantages are the perceived higher costs because it is syndicated business. There are inefficences. The capital structure is antiquated and it has a reputation for poor financial performance. There are no tax advantages."

By contrast Bermuda has the advantage of the speed with which a new player can be set up and go into business.

However, he added the caveat: "There are few regulatory restrictions - which can be good and bad. Speed is good but I'm fearful that a badly run Bermuda company could damage the reputation of the Island and other companies (here).

"There is the tax advantage - but only if you are making a profit. There is a the proximity of the US and being in this time zone, the strong leadership of Ace and XL and the reputation from being here."

Turning to the disadvantages of the Island, Mr. Catlin retold a story of how he and a colleague had been dismayed one day to find their home electricity supply, as well as much of their side of the Island, had been disrupted. That also meant there was no running water because the pumps were out. To add a cherry to everything, the fault turned out to be an electricity relay station that was on fire — and happened to be insured by the company.

Other disadvantages of Bermuda, Mr. Catlin said, were its poor distribution because of the relative lack of retail brokerages, the high cost of employment and the shortage of available staff.

For good measure the Catlin Group chairman then turned to the US — the world's largest insurance market — and noted its great distribution if you happen to be based in the States. However, the US has a downside with state insurance regulations, civil justice system uncertainties and rapidly rising property prices in California and Florida.

As a brief aside, he touched on the importance of establishing offices and operations in the emerging powerhouses of China, India, the Middle East and the Pacific Rim, as well as tapping into the advantages of both London and Bermuda and the US.

"You do have to have a presence in all markets, and that now includes the Middle East and the Pacific Rim. The jam today is in the US, but if we want to be around in 15 or 20 years time we better be in China, we better be in India, we better be in the Middle East," he said.

By the time the afternoon panel discussion, entitled "London to Bermuda - not just a one way ticket", got underway many of the main arguments had already been touched upon.

AIG's European head of tax Robert Gill said the tax advantages should not be the main consideration and pointed instead to Bermuda's "critical mass" as a centre for insurance and reinsurance, its stable political environment, its geographical position between the markets of Europe and the US.

Mr. Gill did concede tax rules meant Bermuda was an attractive place for a company to have its HQ here and hold its financial capital.

But on the horizon there are questions about how Bermuda may be impacted by "Solvency 2", which is a fundamental review of the capital adequacy regime for the European insurance industry that aims to establish a revised set of EU-wide capital requirements.

These requirements should help supervisors protect policyholders' interests more effectively by making prudential failure less likely — reducing the probability of consumer loss or market disruption.

Solvency 2 is still at the draft stage, but it will affect companies in jurisdictions outside the EU, such as Bermuda, if they provide reinsurance within the EU. Such third country reinsurers will need to show prudential equivalence matching EU standards, explained speaker Jane Portas, a general insurance regulation director with KPMG LLP UK.

She added: "One of the key things is for Bermuda to gain that equivalence. I know the BMA is working towards that. Bermuda is in a unique position to develop capital instruments that qualify for Solvency 2."