Perfect positioning

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Bermuda is home to a thriving and dynamic offshore financial services industry. For many years, it has been the leader in creating and implementing business and regulatory models that have become the standard for other jurisdictions to follow.

Bermuda is within two hours by air from most US east coast hubs and a short flight from Canada. Daily air services to the UK and Europe make it a gateway between Europe and North America. Its proximity to the world’s largest capital markets and global business centres has been a key ingredient in its success; it has carved out a niche in the global financial services industry that is well known and highly regarded.

Bermuda’s pragmatic commercial approach has created an operational, technical and regulatory infrastructure focused on clients’ needs, which is the result of a collaborative effort between its private and public sectors. This model ensures jurisdictional policies remain in line with or ahead of market developments and keeps Bermuda’s regulatory oversight at prudent levels, while also maintaining support and appreciation for the entrepreneurial spirit that drives innovation.

This approach has driven the development and success of Bermuda’s insurance and global financial services industries. The country has been transformed from a tourist destination in the 1950s to being one of the most significant insurance and reinsurance centres in the world. At the end of 2006, the Bermuda Monetary Authority (BMA) reported more than 1400 insurance and reinsurance companies on its register, with more than $100bn in assets and capital and surplus of more than $110bn (for the year ending 2005).

Historically, Bermuda was seen as a captive insurance jurisdiction. However, in the past 15 years, it has evolved to become a global leader and is supplying 40% of the US and European market property catastrophe reinsurance coverage. Its reinsurers rank 13th out of the top 40 in the Standard and Poor’s reinsurer rankings and 15th out of the top 35 AM Best reinsurer rankings.

Bermuda’s foundation for success in a global marketplace has been its support of the capital markets, a centre of excellence with a diverse and talented underwriting pool and an effective and appropriate regulatory regime. Household names, such as Citigroup, the Bank of New York, Nomura Securities, HSBC, Ace and XL Capital, have established a presence there.

Financial services leader

The mainstays of Bermuda’s strength as a leader in the offshore financial services industry can easily be traced to the jurisdiction’s longevity in the business. As one of the early pioneers, Bermuda has developed a commercially sensible level of regulation based on years of experience, and has created products that meet the needs of its sophisticated client base. Its experience has produced a deep and knowledgeable infrastructure of service providers. Its infrastructure extends to services provided by global fund administrators, attorneys, banks, auditors and the Bermuda Stock Exchange. It has evolved to offer a sophisticated product to a sophisticated and selective client base.

A recent example of this innovative approach is Launch ’n’ List, a product made available to the global hedge fund industry. The product is the result of collaboration between the Bermuda International Business Association, the BMA and the Bermuda Stock Exchange (BSX). It was developed as a result of industry feedback that indicated a growing frustration among practitioners with the length of time it took them to create, domicile and list a structure. The procedure seeks to reduce and eliminate duplicate effort, which in turn reduces the amount of time to market.

The BSX has been in existence since 1971 and has carved a niche in the global stock exchange industry, with nearly 550 listed issuers with a combined market capitalisation of about $330bn. Offering a complete stock exchange solution in one of the world’s most respected and sophisticated offshore financial centres, the BSX trades and settles stock and cash transactions daily through its electronic trading, settlement and depository systems.

Sensible regulatory approach

The BSX’s development and success has helped the growth of Bermuda’s capital market and has provided opportunities for international clients. Its commercially sensible regulatory approach dovetails with that of the jurisdiction, and is based on accepted international regulatory and operational standards. It seeks to achieve an appropriate balance between providing issuers with access to the market at the earliest opportunity, and providing investors with safeguards and timely information to enable them to make informed decisions on the value, risk and merit of listed securities.

The BSX’s regulatory approach has been embraced by the global fund industry. Of the listed vehicles, more than 100 are hedge funds or have hedge fund attributes. Recently, interest has been growing in the listing of fixed income products and derivative warrants: more than 100 derivative warrant structures listed in 2007 alone.

The BSX’s international regulatory recognitions and longevity has resulted in it becoming the location of choice in the offshore world for entities wanting a superior level of support and distinction from their listing. More than half of the funds listed on the exchange originate from other jurisdictions.

In the future, Bermuda will continue to drive innovation in its core financial services industries. The stakeholders have always embraced change in anticipation of the potential opportunities that may follow.

There is huge opportunity in the global stock exchange industry for the BSX. Its unique approach in respect of regulatory infrastructure coupled with a strategic geographical location and internationally recognised electronic stock exchange platform places the BSX in a very exciting position to take advantage of rapidly changing and expanding global capital market opportunities.