BMA seeking Cox’s successor
The process of finding a successor to Jeremy Cox, the executive chairman of the Bermuda Monetary Authority, has begun.
For the past nine years Mr Cox has headed the BMA and guided the financial-services regulator to important milestone including, in the insurance space, achieving jurisdictional equivalence status with the European Union, and qualified status with the US.
He began a three-year term as executive chairman at the start of this year, which combined his previous role as chief executive officer. He succeeded Gerald Simons, who retired as chairman of the board at the end of 2018.
Mr Cox's achievements with the BMA were hailed on Tuesday when he was awarded the Fred Reiss Lifetime Achievement Award and received a standing ovation at the Bermuda Captive Conference.
He returned to the conference yesterday as a keynote speaker. When asked by The Royal Gazette about the succession issue, he said the BMA board has begun the process and before the end of September there will likely be an advertisement for a CEO-designate. The aim is to have a person in position for a “handoff” period with Mr Cox before his three-year term comes to an end.
In his keynote address, Mr Cox spoke about “game-changers” the BMA has dealt with during its 50-year history.
The first came soon after the authority was formed in 1969 when, the following year, the UK ended its sterling area-based exchange control laws.
“It was a surprise move that left Bermuda out on its own and excluded from sterling area privileges. We were no longer part of a club that was thought, in those days, to be the source of our economic stability,” Mr Cox said.
The BMA introduced the Bermuda dollar, effectively replacing the British pound as the island's currency.
Its second job was to assume responsibility for supervising the banks, while the third was taking over responsibility for vetting company licence applications, and the fourth job was exchange control.
Its responsibilities increased over the years, and it took responsibility for the island's insurance industry in 2002.
Mr Cox said the second game-changer was the global financial crisis of the late 2000s.
“From the early days of captive insurance companies, to the arrival of the large commercial reinsurers, and more recently to fintech and alternative capital, we have refereed a game in which the goalposts were constantly being moved.”
He said that since 2005 — the year of hurricanes Katrina, Rita and Wilma, and the introduction of insurance sidecars — the BMA's function has become more complex and challenging.
“Goalposts are now considered a luxury, and one that we have had to learn to live without. Now the focus is on understanding the elegant, but often esoteric, definitions of what actually constitutes a goal.”
Looking back on the financial crisis, Mr Cox said the island had been fortunate to have, in the BMA, an integrated supervisory architecture; one regulator for all financial services.
“What that meant was the left hand knew what the right was doing,” he said.
He contrasted this with what was happening elsewhere, where there was separate supervision for banking, insurance, and regulation for other financial services. He said that was a situation “which was eventually blamed for the regulatory arbitrage that contributed to the great recession”.
Many authorities today no longer favour supervision by different independent agencies
When Bermuda set its sights on full equivalence to the EU's Solvency II standards for its commercial insurance regime, it was a tough challenge. “But we never gave up,” Mr Cox said. The aim was achieved in 2016, and it included a negotiated carve out for the captive sector.
“Solvency II served as a major rallying point, bringing private industry and the markets regulatory teams together on common ground like never before,” he said.
Today, Bermuda and other jurisdictions are getting to grips with EU concerns about economic substance.
“Only time will tell whether meeting the challenge of economic substance — which in my view ranks as game-changer number three — will have the same unifying effect as Solvency II.”
Regarding the regulations, he said all Bermuda companies engaged in relevant activities, such as banking, insurance, fund management and other financial services activities, will be required to meet an economic substance test.
In March, the island was placed on the EU's list of noncooperative jurisdictions for tax purposes as a result of a typographical error in economic substance regulations submitted by the Bermuda Government to the EU. The island was removed from the list last month.
“The damage our jurisdiction sustained on March 12, when we were temporarily placed on the EU blacklist, is not irreparable. But it served as a warning that, despite the close relationships we've developed with the world's financial authorities, we are not immune to reputational setbacks. We cannot afford to become complacent.”
He said the EU has forced every offshore financial centre in the world to change its game.
“We have to respond by showing that we apply an appropriate level of vetting. We have to show that even though our technical analysis may cost us in lost clients here and there, we will not accept business that even remotely resembles a sham.”
Mr Cox, referring to an earlier observation that the BMA had become guardian of the Bermuda brand as well as regulator of the market place, told conference delegates: “I want you to consider that we are all guardians of the Bermuda brand — regulators and regulated.
“The brand is not just what you say and do in customer-placing situations, it is also reflected by what you say and do to each other. So let's take joint ownership and responsibility. That's my call to arms.”