Finance Minister Paula Cox last night said the Island would "not be daunted" by verbal attacks launched on its reputation, after an American risk consultant suggested political corruption and the prospect of independence were the biggest threats to Bermuda's future as a leading offshore financial centre.

Brendan Hewson, the principal of Global Risk Advisory Services, and a regular speaker at conferences focusing on financial crime, said current events in Bermuda had similarities with the situation in the Bahamas in the 1970s, when an exodus of international businesses took place amid political upheavals.

And in an interview with the OffshoreAlert website, Mr. Hewson added that the Cayman Islands were well-placed to capitalise on business that Bermuda could lose.

After reading his comments, Minister Cox said: "It is no secret that Bermuda has earned a reputation of being one of the leading international financial centres, one that is highly regarded. And as a leader in any entity, whether it is business, technology or finance, there will always be those who seek to tear down that stellar reputation.

"We are not daunted. Instead, as a leading jurisdiction we are always thinking of ways of improving and enhancing our standards so that we remain at the pinnacle in our field.

"Bermuda, as a flagship Overseas Territory, recognises and acknowledges that we cannot rest on our laurels of success. There is no room for complacency.

"Instead, we are determined to keep reinventing ourselves and refining our business model and footprint to better serve our clientele. To this end and in response to criticisms, we have made significant policy changes and introduced innovative legislative.

"Bermuda continues to raise the bar as the stakes are increased in terms of providing a quality business environment. Our growth is strong, our GDP is one of the highest in the world and Bermuda is well-placed and well-poised to continue on its path of success."

Mr. Hewson described Bermuda as the offshore financial centre (OFC) "with the biggest bulls-eye on its proverbial chest" at the moment "There are signs that this phenomenally financially-successful island has peaked economically and will face a future of decline caused by rampant political corruption and the very real prospect of independence in the not-too-distant future.

"There are striking similarities between what is currently taking place in Bermuda and what took place in the Bahamas in the 1960s and 1970s, when corruption, independence, and a lack of concern for the needs of international businesses contributed to a wave of insurers moving to Bermuda and banks to the Cayman Islands."

The Caymans stood to benefit most from Bermuda's problems, he added.

"Cayman has the physical infrastructure, professional expertise and intellectual capacity to compete with Bermuda but not yet the legislation," he said. "However, this is one of the issues that is currently being addressed by a Reinsurance Task Force that was set up about a year ago.

"If Bermuda's corruption continues to worsen and the country goes independent, particularly if it is forced through by the government against the will of the people, as has been threatened, then it is only reasonable to expect an exodus of existing business and a slow-down of new business. Cayman is laying the ground-work now to capitalise on this. If it passed reinsurance legislation and tweaks existing legislation, such as removing the term-limits on work permits for expatriates, Cayman would have a significant and irresistible competitive advantage over its biggest offshore rival."

Mr. Hewson added: "Two of Bermuda's largest insurers, Ace Ltd. and XL Capital, are both legally headquartered in Cayman, even though their physical headquarters are in Bermuda, a structure that was put in place many years ago specifically should the day come when they perceive it to be in their financial interests to relocate."

Mr Hewson will speak at the OffshoreAlert Financial Due Diligence Conference in Fort Lauderdale from April 13-15.