Bermuda’s new technology appeal

The international business environment is dynamic with rapid changes and immense competition between countries and jurisdictions to capture capital, deliver innovation through new products and services, and the creation of jobs and sustainable growth.

Longstanding business practices, regulations, and traditional cross-border relationships are continually evolving as new players emerge with original ideas and open, untested markets. An international finance centre that churns out yesterday’s answers to today’s demands will quickly find it has no tomorrow.

But, this does not of course mean that a long established reputation founded on quality and reliability no longer matters, rather that it must be supplemented with innovation that meets the needs of new market entrants and that will take advantage of fresh opportunities opened up by new technology.

New opportunities
Let us take the case of offshore trading platforms to illustrate the point. When the TMX Group, owners of the Toronto Stock Exchange, looked for new international growth opportunities, they chose to make a strategic investment in the Bermuda Stock Exchange (BSX). What was Bermuda’s distinctive selling point, apart from its reputation as a fully regulated exchange that is the only offshore exchange with membership in the World Federation of Exchanges?

A key feature was its 24-hour functioning electronic trading platform that serves as a bridge that links markets around the globe. The BSX has used this position to develop innovative products that marry the evolving capital markets with Bermuda’s expertise in insurance. Today, Bermuda is the leader in insurance-linked securities. The leadership and cooperative approach of Greg Wojciechowski, CEO of the Exchange, made a telling difference. So did the Bermuda Stock Exchange’s recognition of the importance of an offshore trading platform and exchange that can advance capital markets and hasten the next generation of capital markets, products, and services.

But while innovation and the harnessing of new technologies have become essential for a financial centre’s long-term growth, a good idea needs a secure context if it is to translate into a profitable business opportunity. Otherwise, a lone innovator can fall foul of the old adage that “pioneers get all the arrows”.

Therefore, when one of the world’s major hedge funds looked for a suitable jurisdiction for the creation of a reinsurance company that would insure risks from all over the world, it selected Bermuda. John Berger, CEO of Third Point Re, explained in the Royal Gazette, one of Bermuda’s leading daily newspapers: “There are many great advantages to Bermuda. It is a very civil place with an established infrastructure and banking industry.

The Bermuda Monetary Authority is a very respected regulator and good to deal with. Bermuda’s proximity to the US is also helpful, and it’s not far from London.” He added: “But, overall, most importantly Bermuda is really a reinsurance centre.”

Platform for growth
To achieve this sort of recognition as an international centre, a jurisdiction today must have a wealth of expertise from a wide range of experienced service providers, whether home grown or attracted to its shores from abroad, readily available. Such high-calibre service providers must include lawyers, accountants, fund managers, bankers, auditors, insurance professionals, and – increasingly in our high-tech world – IT, telecoms, and e-commerce professionals.

Complex business transactions on a global scale demand nothing less than what can seem a daunting depth and breadth of highly skilled professionals. In today’s fast moving markets what matters is less where you are on the globe and more how easily you can connect with the rest of it. That is the thinking behind Bermuda’s investment in providing the connectivity and technology needed to carry out business in real time in any part of the world.

Also, modern location decisions have a personal as well as professional dimension. Because they are so highly skilled and in great demand, talented professionals tend to shun destinations that are remote, in an awkward time zone, have an unfavourable climate, or lack the security and social amenities that make family life attractive. Political and financial stability is another crucial requirement, especially in the aftermath of the financial uncertainty in Europe and the political upheavals in many emerging countries.

When a centre has achieved critical mass of intellectual capital, with a full array of support professions, then you can be confident that your new product or service will get all the expert backup it needs in order to succeed.

But even that is no longer enough to ensure the recognition of your international centre of choice. Today change happens at a much faster speed. It’s simply not enough to have installed all the latest business support – in the demanding context of global competition a centre that wishes to stay ahead must take care to keep installing each new innovation, provided that it has been tested and found reliable.

Bermudian backing
In Bermuda, we endeavour to keep adding to the effectiveness of the support services for the businesses that are domiciled and operating on the Island. One crucial element in this process is to maintain a continual dialogue with businesses and their advisers – and especially to welcome rather than to deflect challenging feedback.

Listening and learning form a crucial part of building an understanding of the key forces that are driving business decisions in the market. However experienced and enthusiastic a centre may be, its offering can be significantly improved by the insights and practical perspectives of market participants and their professional advisers. That’s why a genuine public-private partnership ensures that businesses can benefit from a supportive and adaptable working environment.

Nor should the conversation be restricted to businesses already located in the centre. In a global economy where cross-border business accelerates by the day, it makes sense for representatives of an international business centre to be regular visitors to jurisdictions likely to be important sources of new business. Business Bermuda’s campaign of marketing activities takes place as much in key locations such as Beijing, London, and New York as back home.

For example, Business Bermuda recently organised a visit to China with the Ministry of Business Development & Tourism to meet leaders of government and industry in Beijing and Shanghai.  The visit built on previous links established in Hong Kong with the China Council for the promotion of international trade. Business Development & Tourism Minister, Wayne Furbert, secured a high profile speaking opportunity at the Chinese Enterprises Outbound Investment Conference in Beijing. This enabled him to highlight the attractions of Bermuda as an international business jurisdiction and to focus specifically on opportunities for Chinese investment in tourism and development infrastructure in Bermuda.

China is a relatively new international market and one that is growing fast. However traditional markets matter too, and they need to be nurtured rather than taken for granted. So Business Bermuda also features an annual Bermuda Financial Services Conference in London. This is an opportunity to reconnect with traditional business partners and to continue to deliver the message on Bermuda’s services and products. Investments in international events such as these enable Bermuda to build its global brand and create an environment that is responsive to the needs of international business.

Staying competitive
But some of the requirements of a successful international centre cannot be achieved by investment or effort – they just depend on the good fortune of a favourable location. Bermuda is fortunate that its location enjoys easy access to major North American cities such as New York, Washington, Boston, Miami, and Toronto. The island also has numerous direct flights to London and easy connections to major European business hubs.

This ease of accessibility can be critical for companies whose leaders need to have those important face-to-face meetings. Tax competitiveness is another critical determinant of the relative attraction of a business centre. Bermuda is an established tax-neutral jurisdiction, and imposes no tax on profits, income, dividends, or capital gains. Indeed Bermuda’s only business-related tax is a payroll tax, which is paid on all employees within a company at a maximum rate of 16 percent.

Equally important, though, in deciding on an international location are the credibility and transparency of its laws and regulations. If these are flawed then a company’s assets and trade in a jurisdiction are in permanent hazard.

Every prudent business wants to compete on a level playing field, not in a system that lets the unscrupulous sneak forward. With that in mind, Bermuda’s rigorous observance of the rule of law has built up its international credibility over many years. The jurisdiction has signed Tax Information and Exchange Agreements and Treaties with member countries of the EU, G20, Organisation for Economic Cooperation and Development and white-listed jurisdictions and other key countries. Agreements are in place with more than thirty countries including the US, Canada, China, Japan, Germany, France and India among many others.

As an illustration, the BMA, which has sole responsibility for financial regulation, has developed a risk-based approach enabling it to concentrate its resources on those firms that may pose the greatest risk – with minimum bureaucracy imposed on other businesses. Bermuda has a record of being several steps ahead of the compliance curve. For example, the island was in a position to meet the EU’s AIFM Directive long before it was set to come into force.

Looking ahead, Bermuda seeks to be ahead of the game also in new global developments such as takaful and retakaful and other forms of Islamic finance, special purpose insurance with exotic names such as cat bonds and sidecar transactions, and support for China’s drive to establish sophisticated financial products more appropriate to its impressive economic expansion. Bermuda has already come a long way as an international business centre. It has much more still to accomplish as the free flow of capital accelerates around the world.