Renowned as a captive insurance and reinsurance financial centre, Bermuda is now keen to provide sharia-compliant versions of these products to the Islamic world, according to the country’s premier, Craig Cannonier, who was in London at the end of October to attend the World Islamic Economic Forum. “Governments have to be more agile and [need a level of] diversification that they never had to consider before. It is important for us to be here [at the forum, talking about Islamic finance],” he said.
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So far, Bermuda has concentrated on attracting foreign direct investment from Muslim investors who hold large interests in the hospitality business and have already invested heavily in Bermuda-based funds, including sharia-compliant funds, according to consultancy PricewaterhouseCoopers.
Finance minister Bob Richards (pictured, below) says that Bermuda’s need to diversify its investor base matches that of Muslim investors. “There is clearly a need for reinsurance anywhere in the world and Islamic countries are no exception,” he says. “Our approach has been to engage with nations and representatives from the Muslim world on a one-to-one basis [and], from what I’ve heard, they want to diversify their investments, while we want to diversify our customer base.”
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“We’ve done a lot of research into this. What we discovered was that we didn’t have to change [our legal framework]. That’s the reason why GE was able to do that sukuk deal a couple of years ago. It was clear it was able to do it within the construct of Bermuda’s legal system,” says Mr Richards. “As far as I’m aware, no changes [are required] to make takaful and re-takaful happen.”
Mr Richards points out that Bermuda’s existing legal framework already allows for the creation of sharia-compliant products, which would include captive insurance and reinsurance, or captive takaful and re-takaful. A sharia-compliant financial instrument, in fact, has already originated from the Caribbean hub in the past: Bermuda-domiciled GE Capital Sukuk, a special-purpose vehicle owned by multinational conglomerate GE, issued a $500m sukuk in 2010.
Aside from financial tools, Bermuda is also trying to attract Islamic investors further into its hospitality-related infrastructure. Mr Cannonier (pictured, top) said at the London forum: “We built our infrastructure back some time ago based on tourism. Then, in the 1980s, we moved [our attention to] finance. Some of the hotels have gotten older now and we’d like to see some investments back into those areas.”
Eyes on the ball
The Bermudan government is also keen to boost its appeal to traditional asset managers, which have been leaving Bermuda for other jurisdictions over the past few years. Mr Richards says: “It’s been an extraordinarily difficult environment for asset management. I come from that background so I can speak from experience. It’s been difficult all around; however, as a country, we took our eye off the ball in the past few years.”
Before joining politics in 1997, Mr Richards was general manager of Invesco Global Asset Management after having set up Bermuda Asset Management, a firm that became affiliated with Invesco. Previous to that, he was investment manager for Shell Trust Bermuda.
“Essentially, in Bermuda we were originally in the tourist business. Now we have a new kind of tourist: we don’t have someone who comes and stays for five days, we have someone who comes and stays for 15 years [asset managers]. We have made life somewhat difficult for these people in the past five to seven years and a lot of them left,” says Mr Richards.
Bermuda is determined to attract both traditional and Islamic investors to its shores. But with investors undoubtedly keen to see what actions will follow the government’s recent announcements, the country needs to act quickly as other centres, large and small, are competing for the same market. At the same forum, in fact, UK prime minister David Cameron also energetically confirmed his country’s interest in attracting Islamic investors.
