Riding out the economic headwinds
Virtue isn't just its own reward, certainly when it comes to maintaining above board political, business and regulatory infrastructures: the many economic, social and cultural benefits that ensue can actually be quantified.
In fact, watchdog organisations such as Transparency International compile global league tables of sorts to demonstrate the rich dividends accruing to states predicated on the rule of law, accountability and liberal democratic principles.
Bermuda routinely ranks highly in these unofficial but nevertheless compelling surveys.
And the fact is the island has long prided itself on the integrity of its institutions. They have inspired the trust and confidence not only of our own people but, ever since the island launched itself in earnest as a player in the global financial services arena in the late 1980s, of our international clientele as well.
In many ways Bermuda has come to represent the gold standard of small, specialised international business domiciles.
We enjoy a genuinely enviable reputation for probity and fair dealing. Our legislative and oversight bodies have evolved to keep pace with often rapidly changing circumstances and needs, in terms of everything from winning regulatory recognition for Bermuda from the United States and European Union to meeting or surpassing new international tax transparency standards. We have an independent and impartial judiciary. And our considerable institutional strengths are bulwarked by an informed and engaged population, a robust media and other mainstays of any free and vibrant community.
Just how dependent we now are on the international business sector was underscored again last week by the Association of Bermuda Insurers and Reinsurers, the chief lobbyist and global cheerleader for the local industry.
Insurance and reinsurance remain the engine driving an offshore sector that now involves everything from a thriving international trust business to providing a global base of operations for such iconic corporate brands as Jardine Matheson and Bacardi.
Last year, the major insurers and reinsurers based in Bermuda contributed $834.3 million to the economy, with total spin-off benefits estimated to be worth hundreds of millions of dollars more to the island's bottom line. Contributions from other areas of the offshore sector accounted for many of millions of dollars more in direct and indirect infusions.
Simply put, our economy and entire social structure would collapse overnight if Bermuda were to lose its lustre and, along with it, our global competitive advantage as an international domicile.
Abir chairman Stephen Catlin described the island in the most glowing and unqualified terms as “the best place from which a global commercial insurer and reinsurer can do business”.
But he also cautioned that international developments, as well as locally generated headwinds, likely militated against any immediate further growth in the sector.
In fact, he encouraged Bermudians to work towards sustaining and consolidating the island's existing international business while keeping a weather eye open for future opportunities we can pursue in more settled times.
A two-front effort is called for.
In terms of global challenges, Bermuda has to ensure full and complete compliance with pending changes in tax-reporting and disclosure requirements called for by the Organisation for Economic Co-operation and Development and the EU. Based on past experience, both our legislative and regulatory branches should be well positioned to respond to these major new policy requirements and imperatives.
But in terms of what Abir described as the local political risks facing the industry, past experience is not necessarily an altogether encouraging indicator of how the future may unfold.
Abir said the key factors were “considered to be government fiscal challenges and potential civil unrest tied to local political battles over immigration policy and spending priorities”.
Abir's executive director Bradley Kading added, in an unusually frank remark: “Sometimes it's easy for political leaders here on the island to forget the world is watching, but actions here do affect Bermuda's global reputation and can influence its international business and tourism sectors — to the detriment of the local economy.”
In other words, having the institutional infrastructure and capability is not enough. Having a copper-bottomed international reputation for integrity is not enough. Bermuda's international business sector must also have increased political and, by extension, community “buy-in” if it is to withstand present and future pressures.
Abir was pointing out that it is necessary for the broadest possible swath of Bermudians to accept that we all have a vested interest in maintaining offshore business, and for public attitudes and political behaviour to reflect that straightforward reality. Fostering a climate of engagement between a local community that sometimes believes itself wrongly to be standing at one remove from its economic mainstay must clearly be a priority for both industry and political leaders going forward. Encouraging a greater appreciation of, and respect for, a local economy centred around financial services, and that sector's needs, has to be at the forefront of our thinking rather than an afterthought, as is still too often the case now.