Eight things Bermuda must do to remain relevant
Bermuda as an international business jurisdiction has never before faced as many challenges and potential game changers as it does today.
Its character will be severely tested, and there are things it must do to remain relevant in the changing world, according to one of the island's business leaders.
Among the things Bermuda must so is embrace both emerging technologies, such as artificial intelligence, and diversity in hiring, including diversity in nationality, race, gender, religion and sexual preference.
That's the view of Patrick Tannock, chairman of the Association of Bermuda International Companies, and managing director of Axa XL.
He was the keynote speaker at the EY (Re)Insurance Business and Accounting Update conference, and said the challenge and opportunity is to keep up with the rate of change.
Mr Tannock spoke about wider geopolitical events around the world, before tightening his focus on to Bermuda.
“Our adaptability and resilience as a jurisdiction has been severely tested in the last 24 months. We have weathered a series of potentially existential threats — economic hurricanes,” he said.
“We've had the Paradise Papers, which highlighted the fragility of our reputational capital as a jurisdiction.”
Other tests have included the 2017 Tax Cuts and Jobs Act, in the US, which eroded the margin differential between the US and Bermuda, and the EU Council code of conduct and economic substance requirements that led to Bermuda being listed and then removed from an EU blacklist this year.
Mr Tannock also mentioned the OECD's digital tax proposals that seek to find solutions for where and what portion of profits should be taxed, and where multinational corporations in the digital economy pay a yet to be determined minimal tax rate.
He also talked about specific challenges facing the insurance sector, from hardening market and disruption and dislocation in underwriting philosophy, to major catastrophe losses and the run-off of high profile ILS funds.
In addition, there is a “relentless war” to attract and retain high quality employees who can keep pace with technological change, and to use new technology to “optimise the possibilities of big data, artificial intelligence, insurtech, fintech and the list goes on”.
Mr Tannock said there are eight things Bermuda must do to remain relevant, they are:
1, Increase the speed of execution. Mr Tannock said: “The detachment of capital from risk is disintegrating as we enter a new era of capital on demand, or just-in-time capital. We have to use and build on our competitive advantage of speed to market to capitalise on opportunities that come from change.”
2, Proactive adaptability. “History is littered with industries and jurisdictions that failed to adapt,” he said. “We are in an era of extreme fluidity, and what it will look like in five or ten years is hard to predict, but it won't look like it does today.”
3, Everyone has a role to play. “We must remain vigilant and be our own best advocate for our value proposition as a market and an IB jurisdiction,” Mr Tannock said.
4, Trust. “We must be vigilant in maintaining trust with investors, customers, and the people of Bermuda,” he said.
5, Focus on value service. “Bermuda is a service economy. Capital will always go where it is well treated and can secure the best return. Service should not be confused with servitude. This is not about kissing up, it's about economics,” said Mr Tannock.
“As an industry the focus of late has been on process and product innovation, however, we must ensure that behavioural innovation has a seat at the table with product and process innovation, with the goal to enhance the customer experience with the goal to enhance ourselves and increase our value. We must invest in soft skills, and we all need to raise our game.”
He added: “In today's world there is no room for arrogance — park it at the door, and that goes for all of us, employees and employers, Bermudians and internationals.”
6, Technology. “Fear is the enemy of growth. We must be courageous and act with a heightened sense of urgency in embracing technologies such as artificial intelligence/machine-learning, cloud computing, to harness data to achieve better predictability, efficiencies, profitability and to enhance solution options to existing and emerging risk,” Mr Tannock said.
“We must embrace emerging technologies, such as AI which have the potential to have a bigger impact than anything since the advent of computers. Its consequences can be far more disruptive and powerful, and relatively cheap. It will spread faster than computers did and touch every industry. The real prize and potential of AI is being able to do things that haven't been previously done.”
7, Diversity, inclusion and talent. Mr Tannock said: “Companies don't run themselves, people do. Statistics have shown that companies that embrace diversity in hiring practice outperform their peers. They are more innovative and more in touch with their clients and are generally more progressive and forward thinking.
“This means a selection of qualified candidates of diverse backgrounds, whether of different nationality, race, gender, religion or sexual preference. We must continue to tap in to the best intellectual capital around the world, and within these 24 sq miles, to find solutions to offer differentiated and enhanced products and new ways to address risk.
“Although, I acknowledge that diversity and inclusion is not just about identity group representation, there is a clear lack of racial and gender diversity in the industry that is the economic engine of this country. And we don't have to deny that there has been some progress made to have an honest conversation about some of the real challenges and issues that remain to level the playing field of opportunity.
“With a real sense of urgency, we must strategise about how we can increase diversity and inclusion at all levels. We must aspire to be the leader in diversity and inclusion. Let's seize the opportunity to harness the power of diversity and inclusion to generate sustainable solutions for our clients and ultimately the world.”
8, Collaboration. “Real listening brings people closer together,” Mr Tannock said. “We need real collaboration between government, international business, unions and other community stakeholders is critical to ensure that Bermuda remains a leader in IB.
“As long as we don't become insular with our thinking and revert to pursuing stability at the expense of embracing change, we will not only survive, but we will thrive and flourish as a jurisdiction of choice.”
Mr Tannock concluded by saying Bermuda has a great track record of responding to challenges and opportunities that come from change.
“But this is different, this is not a remake of an old movie or a sequel. No one has seen this movie before, this is unprecedented and will require an unprecedented response,” he said, then added: “I am confident that we will get through this.”