Axis Capital chairman Michael Butt says Bermuda has to "stay on its toes" to ensure it continues to attract international business as it faces multiple threats from potential changes in US taxation law, competition from rival jurisdictions and the challenges thrown up by the global economic downturn.

"Jurisdictional arbitrage and changes of domicile are part of the global marketplace," Mr. Butt told The Royal Gazette. "Nothing is static. Bermuda needs to retain and improve the advantages for people to do business here.

"I don't think Bermuda's future is seriously at risk, but it has to stay on its toes to continue to attract international business. I think the Ministry of Finance and the Bermuda Monetary Authority are aware of that and so I'm not too concerned."

Several companies have decided to leave the Island over the past two months to redomicile in either Switzerland or Ireland, including industrial conglomerate Tyco International, engineering company Foster Wheeler, health care products maker Covidien and oil company Weatherford International. Some have hinted that potential imminent changes in US tax laws are behind their decisions.

Mr. Butt did not believe Bermuda's insurance companies would follow suit.

"The reasons that Tyco and others came here are different from the reasons that insurance companies came here, and so are the reasons they have left," he said.

Axis made a greater profit in the fourth quarter than any other Bermuda international insurer to have declared results so far.

And Mr. Butt has further reason to be upbeat for the future after Standard & Poor's upgraded Axis' financial strength rating to A+ this month, while most insurers' ratings are coming under downward pressure.

"It's very positive for us and we're delighted," Mr. Butt said of the ratings upgrade. "This is particularly an achievement in this environment, when nearly everything else is going in the other direction.

"This is a time in which we are seeing a flight to quality and anxiety from buyers about the financial security of insurance companies. It is an extremely positive thing for us to be able to tell our clients and is justification for the way we have run our business.

"It is good from a credibility viewpoint. As an insurance company, we are selling credibility."

Mr. Butt said Bermuda's insurance sector had performed better than most of the rest of the global financial services sector and had helped the Island achieve a level of economic stability during the worldwide downturn.

"The world recession has meant less growth, more financial uncertainty and a difficult environment to trade in for everybody," Mr. Butt said.

"From an insurance industry viewpoint, it has meant there is less surplus capital — about 15 to 20 percent less than last year — and we've seen some substantial balance sheet losses." The circumstances meant a "pricing war" was developing, he added.

"Companies like Axis, with a strong balance sheet and strong ratings, are in a better competitive position than they were 12 months ago," he said.

The difficulties that have hit companies like AIG had impacted the market, he added, as clients looked to spread their insurance coverage among more carriers. This would bode well for mid-sized companies, who would benefit in terms of market share, as larger companies lost out.