Bermuda's top insurance regulator has publicly criticised service providers for sometimes failing to exercise "due diligence.'' This he said had sometimes led to unsuccessful applications to license new companies.

Mr. Malcolm Butterfield, who after five years departs the office of the Registrar of Companies next month, also held to the view that there was no real evidence that Bermuda was losing business as a result of the Independence initiative.

But Mr. Butterfield, in addressing about 125 people at a Bermuda Insurance Institute luncheon last week, targetted service providers.

He said, "We have been warned by a few notable authorities in the insurance industry to avoid complacency and to develop a vision for the future.

Recently, I have been told that Bermuda's service providers are becoming arrogant and are not hungry for new business as we enter the mid-'90s.'' He said that the Island had reached a new era with respect to its regulatory environment and that today, Bermuda could not be referred to as a self-policing domicile. But he asked, " Are the service providers in our industry driven by higher fees rather than a higher quality of business? "The answer from my view as Bermuda's chief regulator is this. Based on the lack of due diligence that I have seen, I wonder if some of our service providers are more fee driven.

"You would be appalled at the occasions that applications are turned down and in some cases deferred, all of which could have been avoided if proper due diligence had been exercised in the first place by the service providers.

"Below standard applicants continue to be introduced to our domicile, and the greatest pressure in these types of applications emanate from some of our own service providers. In all cases that fall into this category, my department is doing this Island a tremendous service in holding the banner of integrity and respect high.

"Applications are declined and deferred always for good and sound reasons and it is regrettable at times that our efforts are not regarded in the appropriate perspective by some service providers, and this, in my view, proves that there are cases in this jurisdiction where sufficient due diligence is not being exercised.'' Mr. Butterfield advised that service providers should thoroughly check the background of their clients and try to bring the highest quality clients to the Island. Stress clarity with business plans and have the courage to decline acting for a client, even if it means loss revenue.

"Quality, at whatever cost, should never be compromised. Bermuda has worked extremely hard to develop itself as a highly regarded reinsurance jurisdiction. Let us ensure that we do not make life easy for other competing domiciles, offshore and onshore.'' He said that the total number of insurance companies added to the register for the first part of the year was 19. In a state of the industry address, he said the industry was strong, yet nowhere near reaching its full potential as the world's leading reinsurance domicile.

On Independence, he said, "It has been said that Bermuda could lose confidence in overseas service providers if the Island becomes independent.

All of these theories I find most interesting and quite frankly, I do not agree with.

"The timing of this Independence is a critical factor in ensuring our success. However, I wish to challenge those in the business community to substantiate their facts.

"In simple terms, there are some here in Bermuda who are feeding the uncertainty and confusion to the overseas press. This practice should be discouraged, and Bermuda as a leading jurisdiction should be encouraged to remain focused and professional in meeting these challenges.'' Mr. Malcolm Butterfield