results & q1 bermuda - pwc · 2015. 6. 3. · [email protected] for personalized advice...

LURE OF THE ALPS…Flagstone Re and ACE have already moved their headquarters from Bermuda to

Switzerland. With others likely to follow, why is Switzerland an attractiveproposition for a growing number of Bermudian companies? See page 4

BERMUDA‘TAX HAVEN’LATEST

ALL THERESULTS &ANALYSIS

HAIR TODAY… BUT THEN IT’S GONE!

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10BERMUDAINSURANCEQUARTERLY© 2009 Bermuda Media in association with

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“As the year goes on I expectrevenue growth to remainunder pressure due to globalrecessionary conditions andforeign exchange. While manyof our customers’ exposuresare down due to reduced busi-ness activity, and many com-panies are in search of moreaffordable insurance alterna-tives, the quality of our port-folio of risks continues to improve.”

— Evan Greenberg, Chairman and CEO ofACE Limited

"We are seeing an increasingflow of new business oppor-tunities, particularly withinour specialty reinsurance unitand individual risk segment.Our strong financial res -ources, excellent ratings, rep-utation for superior under-writing and client service along with our ongoingefforts to build out our business capabilities, posi-tion us well to capture these opportunities.”

— Neil Currie, CEO of RenaissanceRe

“While we have seen thegreen shoots of recovery, wedo not believe the risk-rewardcharacteristics have sufficient-ly swung in our favour tomobilise ourselves for a fulloffensive. We believe that, byyear-end, our market-leadingdiversification by product andgeography, together with ourstrong underwriting skills andrisk management framework, will be fullymobilised across both our insurance and reinsur-ance segments to deliver high quality out per-formance.”

— John Charman, AXIS CapitalPresident and CEO

“This is another quarter ofsolid achievement for XL aswe continue to demonstratewe have the wherewithal tonavigate these troubled timesand to deliver on our commit-ments to shareholders and toclients.”

— Mike McGavick, CEO of XL Capital

BERMUDA INSURANCEQUARTERLY

Consulting EditorRichard Whitaker

Art DirectorPaul Shapiro

Contributing EditorChris Gibbons

Director of MarketingLissa Fisher

PublisherIan Coles

Published by Bermuda Media, Suite310, The International Centre, 26Bermudiana Road, Hamilton HM 11,Bermuda. Postal address: PO Box HM2032, Hamilton HM HX, Bermuda. Tel:292-7279 Fax: 295-3189 Email:[email protected]. Web: bermudamedia.bm.Printed in Canada.

Published four times a year in associa-tion with PricewaterhouseCoopers.

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BIQ

The credit crunch and externalthreats to the reinsurance mar-ket are putting increased pres-

sure on the Island’s ratings.In May, Standard & Poor’s

dropped its ratings outlook onBermuda to negative from stable,citing concern about risks toBermuda’s external and fiscal posi-tion from its banking system. Themove followed an earlier ann -ouncement by Moody’s InvestorsService lowering its governmentbond ratings on Bermuda onenotch from Aaa to Aa2.

S&P said Butterfield Bank,with a 51 percent market share ofdeposits, had $152 million in loss-es on its held-to-maturity invest-ments in 2008, which promptedthe Bank to raise $200 million ofpreferred shares. The Bank ofBermuda was issued with a nega-tive outlook in December on con-cerns about rising pressures to itsearnings in 2009.

Despite concerns about the

banking sector, S&P affirmedBermuda’s AA long-term sover-eign credit rating, saying Ber -muda’s low government indebted-ness was about the lowest ofnations rated by S&P. But theagency warned it expects generalgovernment deficits to rise to fivepercent in 2009 and 2010 fromthree percent in 2008.

S&P Credit Analyst NikolaSwann said: “Should the Island’sbanking sector weaken or shouldthe dynamism of its reinsurancemarket wane, the ratings couldcome under pressure. On the otherhand, we could revise the outlookto stable if the country’s external

pressures ease.”Government would face higher

interest on money borrowed if itscredit ratings were downgraded.

Finance Minister Paula Coxsaid she still considered the AAcredit rating a “strong affirmationof the endurance and resilience ofour economy during these chal-lenging times” and that she waspleased that S&P balanced itsanalysis by taking a positive out-look on the resilience of Bermuda’sinternational insurance sector.

Meanwhile Fitch Ratings statedin a Special Report earlier this yearthat its rating outlook for theBermuda reinsurance market

remained negative due to the cur-rent turmoil in the financial markets— but said the Bermuda marketwas likely to fair better than many.

Fitch said while it expectsdownward rating activity globallyand across all of its insurance rat-ings in 2009, Bermuda reinsurerswere less likely to face widespreadrating downgrades than otherinsurance sectors, primarilybecause of their comparativelylower asset leverage and higher-quality investment portfolios.

The report said challenges forthe Bermuda market includedongoing pressure on asset valua-tions, uncertainty surrounding themarket’s ability to recapitalise inthe event of a major catastrophe,and ongoing threats to the Island’stax advantages.

But Fitch said it foresaw oppor-tunities for companies who histor-ically have taken advantage of peri-ods of increased risk to providenew underwriting capacity.

THE QUOTES OF THE QUARTER

V o l u m e 5 , N u m b e r 3J u l y 2 0 0 9

Bermuda ratings under pressureS&P EXPECTS GENERAL GOVERNMENT DEFICITS TO RISE TO FIVE PER CENT IN 2009 AND 2010

‘Challenges included ongoing pressureon asset valuations, uncertainty surrounding the market’s ability torecapitalise … and ongoing threats to the Island’s tax advantages’

[ 1 ]


[ 2 ]

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NEWS REVIEW

Analysts and industry expertsexpect US property casualtyrates to harden in the second

half of 2009, but believe the ongo-ing financial crisis and recessionwill mean only modest increases.

Speaking at Standard & Poor’sInsurance 2009 Conference inNew York in June, Grace Osborne,Managing Director and PracticeLeader for North AmericaInsurance Financial Services atS&P, said recent pricing surveyshad shown progressively smalleryear-over-year price declinesamong primary commercial linesinsurers, hinting at rate rises in thesecond half of the year.

Rates have been falling since2005, particularly since 2007, fol-lowing two strong years of operat-ing results.

Evan Greenberg, Chairmanand CEO of ACE Ltd, told theconference: “The capital levels inthe industry remain adequate —not sufficient, but adequate — andI think that is one reason why rateshave not moved as quickly as somehad hoped.”

He added: “On one hand busi-ness activity has declined, and thatmeans insurance buyers have sig-nificantly dialled back their expo-sures. On the other hand clientssimply view insurance as anotherexpense item, and they are cuttingback. It’s making it much harder toget rate increases.”

S&P said that due to ongoingpressures, it was maintaining itsnegative outlook on the US com-mercial lines property/casualty sec-tor. In the reinsurance sector, pric-ing has started to firm, with rateincreases for property and othershort-tail reinsurance as a result ofhigher catastrophe losses in 2008.

The company said reinsurancecasualty rates remain competitive butpremium rates have flattened sincethe beginning of 2009 compared

with pricing reductions since mid-2004. Although investment lossessignificantly reduced the reinsurancesector’s excess capital position, S&Pbelieves most US and Bermuda firmscontinue to benefit from strong levelsof capital adequacy.

S&P said aggregate capital forBermuda-based reinsurers stood at$65 billion at year-end 2008, whileUS insurers posted a $37 billion

surplus at year-end.David Brown, CEO of Flag -

stone Re, recently told ReinsuranceMagazine that although the indus-try suffered poor or negativebook-value growth during the lasthalf of 2008, the Bermudian rein-surance industry absorbed signifi-cant losses from Ike and otherevents without any serious loss ofcapital.

“This compares well to themess that followed in the wake ofKatrina and indicates that, as anindustry, we have a better handleand control on our exposures,” hesaid. “Furthermore, the mostrecent six months have seen theimpact of the capital losses from2008 create an imbalance betweenthe demand for reinsurance andthe industry’s ability to supply it.”

Rates set to harden later in yearGREENBERG: ‘INSURANCE BUYERS HAVE SIGNIFICANTLY DIALLED BACK THEIR EXPOSURES’

[ 3 ]

MAX CAPITAL GROUP LTD. BERMUDA IRELAND UNITED STATES LLOYD’S

TALENT EXPANDS POSSIBILITIES

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A.M. Best A - (Excellent) Fitch A (Strong) Moody’s A3 SPECIALTY INSURANCE & RE INSURANCE

At Max, we’ve recruited some extraordinary talent to drive our business. From offices in Bermuda, Ireland, the United States and at Lloyd’s, we underwrite a wide range of Property and Casualty Reinsurance and Insurance transactions, as well as Life and Annuity Reinsurance. Expanding the possibilities with financial strength, focused expertise and new approaches to established convention.

‘Insurance seenas anotherexpense item’


NEWS REVIEW

Heading for the hills…BYRNE: ‘SWITZERLAND STOOD OUT AS PROBABLY THE BEST ONE TO BE IN ON THE CONTINENT’

If Bermuda needed any reminder,a leading executive warned that itwould be easy for insurers to

leave the Island if threatenedchanges in the US tax code mate-rialised.

Hans-Joachim Guenther, theZurich-based Chief UnderwritingOfficer and Head of Reinsurancefor Europe and Asia at EnduranceSpecialty Underwriting Ltd, a unit

of Bermuda-based EnduranceSpecialty Holdings Ltd, told aninternational conference recentlythat more companies would moveoff-Island if there were no longerany tax advantages to staying inBermuda.

Speaking at the InternationalReinsurance Summit 2009 inZurich, he was quoted in BusinessInsurance as saying: “The tax envi-

ronment is one of the key driversfor the profitability of our businessand it’s passed on through ourpricing. If tax advantages of oper-ating in Bermuda change andother jurisdictions provide suchbreaks, then I think our businesswill start to move.”

Flagstone Re and ACE havealready moved their headquartersfrom Bermuda to Switzerland,although they retain a substantialBermuda presence.

Flagstone Re Chairman MarkByrne, who also spoke at the con-ference, said: “Based on politicalreasons related to the evolution ofUS politics, we didn’t think thatstaying as a Bermuda companymade sense, and when we consid-ered jurisdictions, Switzerlandstood out as probably the best oneto be in on the continent.”

He added: “Clearly it is moreefficient to have our capital consol-idated in one place than have itsplit between two, which was howit worked before.

“Second, there are many partsof the world where, if you knockon a door and you are from a Swisscompany, you’re better receivedthan if you are from a small islandthey haven’t heard of.”

Bermuda might be knownaround the world as a well-regulat-ed jurisdiction for property catas-trophe reinsurance, he said: “but ifyou are trying to sell aviation rein-surance in India, it’s better to havea Swiss business card.”

The comments drew a sharpresponse from Finance MinisterPaula Cox. “The comments ofSwiss resident and European resi-dent business executives are unsur-prisingly self-serving in promotingSwitzerland,” she told The RoyalGazette.

She said executives who pro-mote Switzerland as safer thanBermuda were “out of step” withthe majority view of Bermuda’sinsurance market leaders who seeBermuda as the platform ofchoice from which to launchglobal operations.

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Local insurance group Argus hasreached an agreement in princi-ple to settle a class action pend-

ing in the US relating to invest-ment losses caused by the BernardMadoff fraud scandal.

The case had been broughtagainst Argus and Argus Inter -national Life Bermuda Ltd, as wellas 10 other funds, money managersand companies, in the US District

Court for the Southern District ofNew York by some of Argus’sinternational life insurance cus-tomers who had seen the value oftheir policies plummet.

In a company statement, Argussaid the terms of the settlement,which are subject to documenta-tion and court approval, incorpo-rate a broad package of reliefincluding loans to policyholders,

the assignment of certain ArgusInternational claims to a litigationtrust, and co-operation by ArgusInternational in connection withlitigation of the assigned claims. Inexchange, the Argus Group andArgus International will obtainbroad releases relating to the claimsin the litigation and other protec-tions and relief. No financial settle-ment will be paid to policyholders.

The statement also said: “TheArgus Group and Argus Inter -national continue to deny all alle-gations of wrongdoing or liabilitywhatsoever with respect to the liti-gation, but have agreed in principleto settle the case to eliminate theburden, expense and uncertainty oflitigation as well as the concomi-tant distraction of resources andefforts from their businesses.”

Argus has also filed a claimwith the Supreme Court ofBermuda against Tremont GroupHoldings Inc and Tremont (Ber -muda) Limited. Argus boughtTremont International InsuranceLtd (TIIL) from the TremontGroup in December 2006, andsubsequently changed the compa-ny’s name to Argus InternationalLife Bermuda Limited.

In addition, Argus has success-fully petitioned the CaymanGrand Court to appoint liquida-tors over the Tremont-managedfunds, Rye Select Broad MarketInsurance Portfolio LDC and RyeSelect Broad Market XL PortfolioLimited.

Gerald Simons, President andCEO of the Argus Group said:“Having done what we can to pro-tect the interests of our policyhold-ers by seeking the appointment ofindependent liquidator ZolfoCooper over the Rye Funds, Argusis now turning its attention to itsown case against Tremont arisingout of the purchase of TIIL. It isquite clear that TIIL was notworth what Tremont said it wasand that Argus has suffered lossesand damage as a result.”

Some of the Argus SelectFunds which support the pensionpolicies of the Argus Group have asmall investment in the PioneerMomentum All Weather Fundwhich in turn had invested in theBermuda-managed Kingate Glo -bal Fund Ltd, a Madoff feederfund. Argus is advised that Pioneeris seeking legal advice in bothBermuda and New York to deter-mine its ability to recover losses asa result of the Madoff fraud.

Argus settles over Madoff lossesBUT NO FINANCIAL SETTLEMENT WILL BE PAID TO POLICYHOLDERS

NEWS REVIEW

[ 6 ]


The Bermuda Monetary Auth -ority has published another keyConsultation Paper in its ongo-

ing efforts to ensure Bermuda’sinsurance industry meets interna-tional regulatory standards.

According to a BMA state-ment, “Standards and ApplicationsFramework for the Use of InternalCapital Models for RegulatoryCapital Purposes” outlines theAuthority’s proposed applicationprocess and model approval crite-ria for Class 4 reinsurers applyingto use an internal capital model todetermine their regulatory capital.

Establishing an internal capitalmodel framework is part of theAuthority’s ongoing work to dev -elop a leading international regula-tory framework for Bermuda’sinsurance sector.

BMA CEO Matthew Elder -field said: “The Authority is work-ing towards the goal of achievingregulatory equivalence for Ber -muda’s insurance framework with-in key international markets. Theissuance of this ConsultationPaper represents the completion ofanother milestone for the Auth -ority on the road to mutual recog-nition.”

The use of regulator-approved

internal models is in line with inter-national proposals on solvency thatare currently in development, suchas Europe’s Solvency II Directiveand the International Associationof Insurance Super visors solvencyproposals. The BMA began devel-oping its framework in 2008 whenit conducted a survey with all Class4 reinsurers to evaluate the extent towhich internal capital models were

in use by companies, and therobustness of those models. Thisactivity was followed up with a trialreview of a small number of compa-nies’ models. At the end of 2008 theBMA published a report sum-marising the findings from the sur-vey and reviews.

The Consultation Paper repre-sents the next step in the develop-ment of the BMA’s enhanced sol-

vency framework for Bermuda’slargest insurers. This frameworkincludes: the Bermuda SolvencyCapital Requirement; the Auth -ority’s Standardised Capital Ade -quacy Model that was introducedat the end of 2008; the InternalCapital Models framework, and anOwn Risk and Solvency Ass -essment regime which is currentlyin development.

NEWS REVIEW

BMA publishes key consultation paperAUTHORITY WORKS TOWARDS REGULATORY EQUIVALENCE FOR BERMUDA’S INSURANCE FRAMEWORK

[ 7 ]

RenRe formsnew reinsurerBermuda reinsurer Renaiss -anceRe has set up a newBermuda sidecar to provideadditional reinsurance capacityfor the Florida homeownersmarket in the current upcom-ing renewal season.

RenaissanceRe will cede adefined portfolio of its propertycatastrophe business coveringprimarily hurricane risks forFlorida insurers during the2009 hurricane season, toTimicuan Reinsurance II Ltd(Tim Re II). Tim Re II hasapproximately $60 million ofequity capital, including $10million invested by RenRe.


NEWS REVIEW

Shareholders of IPC Holdings Ltd have votedagainst their Board by rejecting a plannedmerger with Max Capital Group Ltd. Themove now paves the way for a hostile takeoverby rival Bermuda reinsurer Validus HoldingsLtd.

On June 12, IPC shareholders voted againstthe merger by “a wide margin” according to oneinsider quoted by the Wall Street Journal. AValidus statement put the figure at 72 percent.In a simultaneous meeting, Max shareholdershad voted overwhelmingly — 90 percentaccording to a company statement — in favourof the deal first announced in March.

IPC began looking for partners last year toexpand its business, and Chairman KennethHammond said in a statement issued after themeeting: “We have heard the message sent byIPC shareholders. The board will review allstrategic alternatives to maximise shareholdervalue including sale of the company, and as partof this review will give consideration toValidus.”

Validus CO Ed Noonan said in a statement:“By rejecting the Max amalgamation by anoverwhelming margin, IPC shareholders haveclearly spoken. We now expect IPC’s Board toheed the message sent by IPC’s shareholders byagreeing to Validus’ pending AmalgamationAgreement without delay so that IPC’s share-holders can receive the superior value offered byValidus promptly.

“We are gratified that the Max amalgama-tion agreement has now been terminated and weurge the IPC Board to work co-operatively withus to achieve an expeditious closing of theValidus transaction.”

Under Validus’ offer, IPC shareholders wouldreceive $3.75 in cash and 1.1234 Validus votingcommon shares for each IPC common share, fora total consideration of $30.32 per IPC sharebased on Validus’ closing price on June 11.

Validus had launched its rival bid on March31, just weeks after the IPC-Max merger was

announced, with Mr Noonan declaring: “Thisproposal represents a compelling strategic com-bination that we believe would generate superi-or value for both Validus and IPC shareholders.The shareholders of both companies wouldbenefit from being part of a larger, more diver-sified, global business which would be a market-leading carrier in Bermuda’s short-tail reinsur-ance and insurance market.”

The three firms then became locked in anincreasingly bitter battle. Four days before theshareholders meetings, Validus upped its bid forIPC to $1.72 billion.

Marty Becker, Chairman and CEO of MaxCapital, commented: “The Board, employeesand shareholders of Max were excited about thedeal with IPC, and we are, of course, disap-pointed that IPC’s shareholders did not approveit. We believed and continue to believe that thecombination of Max and IPC would have creat-ed significant value for both companies’ share-holders. However, we also believe that main-taining our perspective and discipline as a par-ticipant in this process was in the best interest ofour shareholders. Max is a strong, diversifiedunderwriting company and will continue tofocus on building the value of our global busi-ness for our shareholders.”

The merger would have resulted in IPCshareholders owning about 58 percent of thecombined company, with Max Capital share-holders owning the remaining 42 percent. TheIPC board insisted that the subsequent offerfrom Validus was inferior and “not in the bestinterests of IPC and its shareholders as awhole,” saying the offer was at a significant dis-count to IPC’s book value and offered less bookvalue per share than the IPC/Max transaction.

In a letter to shareholders on June 2, the IPCChairman said the deal “meets all of the IPC

Board’s key criteria for enhancing shareholdervalue: greater scale and scope, diversificationinto non-correlated risks, preservation of thevalue of IPC’s existing franchise and increasedmanagement depth.”

Validus waged a determined PR and legalcampaign to block the IPC-Max deal, and MrNoonan said: “Validus’ superior offer contrastswith the proposed Max amalgamation, in whichIPC shareholders would receive less cash, whichis being paid solely through dividends. Thesedividends are essentially just returning IPCshareholders their own money and Validusbelieves, like most special dividends, will notresult in a meaningful increase in IPC’s aggre-gate shareholder value.”

Three days before the vote, Validus saidRiskMetrics Group, an independent proxy vot-ing and corporate governance advisory firm, hadrecommended that IPC shareholders reject theMax offer, but IPC accused RiskMetrics ofusing “bad math” to come up with its recom-mendation.

It said RiskMetrics ignored book valuegrowth for IPC’s operations, the potential incre-mental returns on $400 million excess capitalthrough special dividends, and potential deploy-ment for additional earnings growth. IPC saidanother proxy advisory firm, Glass Lewis & Co,had recommended shareholders vote for thedeal.

In a letter to the company’s shareholders, adisappointed Mr Becker said: “In the end, theMax Board of Directors did not believe that fur-ther enhancement of our proposal would beadvantageous for our shareholders. While theIPC combination would have been an attractivecombination to enhance our size and scale, wewanted to ensure Max shareholders were prop-erly rewarded for the value that Max was bring-ing to the transaction. Max is a very vibrant andsuccessful business with significant shareholderupside and more than adequate capital to exe-cute our business plan.”

VALIDUS EXPECT IPC’S BOARD TO AGREE PENDING AMALGAMATION AGREEMENT, CHRIS GIBBONS REPORTS

IPC shareholders reject Max merger

[ 8 ]

Marty Becker, Max Chairman and CEO

NOONAN: ‘We urge theIPC Board to work co-operatively with us to achieve anexpeditious closing of the… transaction’

BECKER: ‘Max willcontinue to focuson building thevalue of our globalbusiness for ourshareholders’


Anew Economic Impact Studycommissioned by the BermudaInternational Business Assoc -

iation underlines the growingimportance of the Island’s reinsur-ance sector in supporting the USeconomy.

The study confirms that Ber -muda is the leading offshore sup-plier of insurance, reinsurance andpayer of property and casualtylosses to the US, and the fourthmost important export market forUS financial services and insur-ance.

The Economic Impact Studywas conducted in the first quarterof 2009 by Stonebridge Interna-tional, a leading Washington DC-based global business strategyfirm founded by Samuel “Sandy”Berger, President Bill Clinton’s former National Security Advisor.

BIBA said Lead ResearcherCharles Ludolph, a Senior USEconomist For International Trade

And Investment, used only pub-licly available economic informa-tion and scoring methods used bythe US Congressional BudgetOffice for the study. As such, thestudy is likely to provide usefulammunition for Bermuda’s lobby-ists on Capitol Hill as they seek toderail possible tax and regulatorythreats to the Island’s reinsurancebusiness.

BIBA CEO Cheryl Packwoodsaid: “For years Bermuda hasknown that we are dependent inlarge part on the United States forour continued economic growth

and success, but rarely hasBermuda turned the tables tofocus on the role that Bermudaplays in supporting the US econ-omy.

“This study puts some realsubstantive findings behind theargument that Bermuda plays aninvaluable and incomparable rolein the United States. While thateconomic support begins withinsurance and reinsurance, itextends beyond those industriesspecifically and supports agricul-ture, energy, shipping and invest-ment capital that make a mean-ingful difference in the short andlong-term health of the US economy.”

The study estimates that two-way trade between Bermuda andthe US was worth $60 billion ayear and sustained 300,000 USjobs in 2007 - 100,000 created byannual US exports to Bermuda,with a further 200,000 derived

from Bermuda subsidiaries major-ity-owned by US interests.

Over the last 10 years,Bermuda has also evolved into asignificant international financialcentre with important ties to theUS investment community. Thestudy says in 2008 Bermuda had1,300 domiciled and regulatedinvestment funds with almost$200 billion in net assets, withUS-owned corporate and taxexempt funds accounting for asmuch as $70 billion of thoseassets, and American individualsfor another $30 billion. The studysaid that most of these Bermudianinvestments are US offshore funds.

Bermuda is also the 10thlargest portfolio investor in USsecurities, its portfolio investmentdoubling to $209 billion from 2000to 2008. Bermudian investors arethe 15th largest holders of USTreasuries and US Governmentasset-backed bonds.

[ 9 ]

Cheryl Packwood, BIBA CEO

Study highlights growing Bermuda role in US economyPACKWOOD: ‘BERMUDA PLAYS AN INVALUABLE AND INCOMPARABLE ROLE IN THE UNITED STATES’


Bermuda’s reinsurance industrybreathed a sigh of relief in mid-May when it was not targeted

in US President Barack Obama’splans to raise more than $200 bil-lion in tax revenues over the next10 years.

President Obama will clampdown on tax havens and removetax incentives for moving jobsoverseas, but stopped short ofincluding the tax code change pro-posed by Massachusetts Represent-ative Richard Neal that would raisethe US tax rate on non-US insur-ance companies — a move that wouldhit Bermuda-based insurancecompanies with US subsidiaries.

At present, the President isfocusing on the offshore activity ofAmerican companies because, as aWhite House statement put it:“Nearly one-third of all foreignprofits reported by US corpora-tions in 2003 came from just threesmall, low-tax countries: Bermuda,the Netherlands and Ireland.”

While the industry might have“dodged a bullet” as one headlinestated, it is still on a war footing,and Bermuda will continue thecharm offensive it has mounted inrecent months. Premier Dr EwartBrown and Finance Minister PaulaCox led a high profile delegationto Washington, DC, in May tofight the Island’s “tax haven” label.“It is important that we continueto tell the Bermuda story onCapitol Hill,” said Ms Cox.

According to the Wall StreetJournal, a US Treasury spokesmansaid the reinsurance issue was stillunder review and that PresidentObama had not yet taken a firmposition on it.

As Bradley Kading, Presidentof the Association of BermudaInsurers and Reinsurers (ABIR),and the industry’s Washington-based lobbyist, told The RoyalGazette: “It’s a long fight. We’vejust passed one more milestone inthe road. The US Government ishungrily seeking revenue from allsources.

“We think there is a recognition

in the [Obama] Administrationthat the proposed discriminatorytax is a complex issue and needsmore study.”

Premier Brown said that basedon conversations he had inWashington, he did not think theNeal Bill had sufficient support.

“More than a few members ofCongress said they had no inten-tion of supporting the Bill becausethey don’t think it’s good forBermuda or good for the US,” hesaid.

The Coalition for a DomesticInsurance Industry (CDII), whichsupports the Bill, claims the taxcode change is necessary to “levelthe playing field” for American-based reinsurers. But Bermudiancompanies say such a move wouldcut the supply of insurance andreinsurance in the US and drive upinsurance costs for American con-sumers.

A report by the Brattle Group, aCambridge, Massachusetts-basedeconomic consulting firm commis-sioned by the Coalition for Com -petitive Insurance Rates (CCIR),claimed that the Neal Bill wouldcost consumers an additional $10-$12 billion per year to maintaintheir current insurance coverage.

According to the study, theNeal Bill would also:� Reduce the supply of reinsur-ance in the US by $19–$22 billion,which represents 20 percent of allreinsurance and 40 percent of allforeign reinsurance (non-affiliated

as well as affiliated).� Reduce the supply of primaryinsurance in the US by 1.8–2.1percent.� Increase the price of primaryinsurance by 1.8–2.1 percent over-all, and by more than 16 percent insome lines of business.

The study said the burden ofreduced supply and higher priceswould fall disproportionately onthe states most vulnerable to cata-strophic losses — California, Flor -ida, New York and Texas.

“This study confirms the fearsof the nearly 40 independentexperts, state government officials,business owners, and associationswho publicly filed opposition let-ters to legislation pending inCongress,” said Mr Kading.

“This legislation imposes anunnecessary and costly tariff oncompanies that help spread insur-ance risks for consumers and busi-nesses in areas subject to hurri-canes, earthquakes, crop failuresand other forms of natural disas-

ters.”In the June issue of Reinsurance

Magazine, Don Kramer, anAmerican-born veteran of theBermuda market and CEO ofBermuda-based Ariel Re, said itwas “infuriating to hear the[CDII] seeking protectionist taxlegislation say repeatedly that allthey want to do is level the playingfield when, in fact, the cession ofinter-company reinsurance toBermuda involves the assumptionof significant risk.”

In the same issue, IronshireCEO Mitch Blaser said: “Any billthat encourages protectionism willultimately have the biggest nega-tive impact on the consumer: costswould increase as the sources ofcapital become more expensive.”

He said it was a misconceptionthat Bermuda-based companies donot pay US taxes. “Federal ExciseTax at four percent of gross trans-lates into taxes of 20 to 40 percentof net income assuming a 10 to 20percent profit and there wasn’t asmuch profit in the business overthe last two years. However, thesetaxes are still paid.

“The issue that the US has todeal with is to be careful not to tarabusers of tax advantages with thesame brush.”

And Max Capital CEO MartyBecker said an ABIR survey ofmembers with significant USoperations, showed that between2004 and 2006 those Bermudacompanies were already paying aneffective average US tax rate ontheir income related to US opera-tions of approximately 28 percent.

[ 10 ]

NEWS REVIEW

US WARNED ‘NOT TO TAR ABUSERS OF ADVANTAGES WITH THE SAME BRUSH’

Bermuda ‘dodges bullet’ over tax change

Government to open DC officeThe Bermuda government is to open an official office in Washington,DC, just seven blocks from Capitol Hill. The office, at 325 7th StreetNW, is expected to officially open in September.

Government made the announcement in May following Premier DrEwart Brown’s trip to Washington at the head of a Bermuda delegationto meet with key members of Congress to put Bermuda’s businesscase in the face of growing tax and regulatory threats. Dr Brown toldthe House of Assembly that the new office would help bolster moves tochange the misconception of Bermuda as a tax haven.

Don Kramer: infuriated Bradley Kading: “long fight”


[ 11 ]

Bermuda has officially been removedfrom the Organisation for EconomicCo-operation and Development’s (OECD)controversial grey list of tax havens aftercompleting the required 12 tax informationexchange agreements (TIEA). FinanceMinister Paula Cox signed Bermuda’s 12thTIEA at the Dutch Embassy in London onJune 8.

Bermuda was included in the list at theG20 Economic Summit in London asworld leaders pledged to clamp down ontax havens.

The list compiled by the OECD namedjurisdictions that had committed to international tax transparency standardsbut had not yet implemented them.Jurisdictions on the list were ordered tocomplete 12 TIEAs by September 2009 or face further sanctions.

Jeffrey Owens, Director of the OECD’sCentre for Tax Policy and Administration,called the signing a “very significant devel-opment” for Bermuda.

The Finance Ministry’s Treaty Unit hasconcluded negotiations on three moreTIEAs, with Germany, Mexico andCanada, which are expected to be signedby the end of the year, and Governmentplans to sign TIEAs with all G7 countries.

In a statement, the OECD said:“Bermuda was one of the first jurisdictionsto commit to the international standard oftransparency and exchange of informationin May 2000.”

Minister Cox pledged that Bermudawould “build upon our long standing posi-tion of transparency and co-operationwhich has, through the years, differentiat-ed Bermuda from other jurisdictions.”

She added: “Most importantly,Bermuda continues to not only meet butexceed standards set by the OECD GlobalForum’s annual assessments, and we areconfident that we have the legislativeframework in place to well position our-selves for the forthcoming model peerreview process as our TIEA partnersrepeatedly publicly commend Bermuda on how well we effectively exchangeinformation.”

However, the Opposition UBP criticisedgovernment’s apparent sluggishness indealing with the issue. Shadow FinanceMinister Bob Richards said:

“We hope the Minister has learned alesson from this exercise — that there can be no complacency when it comes to upholding Bermuda’s international reputation.”

BERMUDATAKEN OFFGREY LIST


[ 12 ]

3

ANALYSIS / PRICEWATERHOUSECOOPERS Q1 2009

OPERATING RATIOS

FINANCIAL STRENGTH RATINGS

QUARTERLY LOSS RATIOSQ1 2009 Q1 2008 Q1 2007

ACE 59.7% 55.6% 62.1%Arch 57.2% 57.1% 56.3%Aspen 56.1% 52.9% 51.4%Allied World 45.8% 52.5% 57.9%Axis 58.3% 54.9% 57.3%Endurance 58.2% 50.9% 55.9%Everest Re 61.1% 59.8% 56.3%Flagstone Re 44.3% 29.4% 47.2%IPC 39.6% 5.9% 50.6%Max Capital 65.7% 69.2% 69.5%Montpelier 34.7% 54.5% 41.8%PartnerRe 55.9% 64.8% 59.9%Platinum 58.2% 53.1% 63.9%Renaissance Re 28.6% 26.6% 40.2%Validus 41.4% 48.0% 41.7%White Mtn 59.6% 68.7% 65.4%XL Capital 59.8% 64.5% 61.4%

QUARTERLY EXPENSE RATIOSQ1 2009 Q1 2008 Q1 2007


QUARTERLY COMBINED RATIOSQ1 2009 Q1 2008 Q1 2007


A M BEST RATING S&P RATINGMay 15, 09 May 15, 08 May 15, 09 May 15, 08

ACE A+ A+ A+ A+Arch A A A AAspen A A A AAllied World A A A– A–Axis A A A+ AEndurance A A A AEverest Re A+ A+ A+ AA–Flagstone Re A– A– NR NRIPC A A A– A–Max Capital A– A– NR NRMontpelier A– A– A– A–PartnerRe A+ A+ AA– APlatinum A A NR NRRenaissance Re A+ A+ AA– AA–Validus A– A– NR NRWhite Mtn A– NR3 A– A–XL Capital A A A A+NR — Not rated by S&PNR3 — Not rated by A M Best

Outlook� Q1 of 2009 has seen some ratehardening in several classes ofbusiness, with primary rates lag-ging pricing movements in rein-surance. Pricing trends have gener-ally been in line with expectations.� The companies in the groupwith stronger capital bases and rat-ings have increased their marketshare and this trend looks set tocontinue.� That said, the overall trend inpremium growth is downward,due mainly to the impact of thecurrent economic environment aswell as the well publicised ‘capitalcrunch.’� Continued hardening for prop-erty catastrophe renewals in Juneand July is expected especially inrespect of Gulf of Mexico exposures.

Earnings� Most P&C companies releasedreserves this quarter. Net favour -able development was generally

more than expected for the group.There was also low cat activity.� Signs of stabilisation in thecredit markets have led some com-panies to start to redeploy cashinto high quality fixed maturitiesto improve yields.

Other� FAS 157-4 and FAS 115-2were issued by the FASB andmodify certain fair value andOTTI requirements. Adoption isrequired for Q2 but early adoptionwas permitted for Q1. Most com-panies indicated that they do notexpect adoption of these standardsto have a material impact on res ultsbut expect that the required split ofOTTI into that arising from creditloss and other factors will be verysubjective. Most companies in oursample did not early adopt.� Several companies repurchaseddebt, preferred shares or commonstock at a discount during thequarter.

Q1 2009 Q1 2008 Q1 2007

ACE 4,535 4,409 4,496Arch 1,029 1,053 1,210Aspen 637 596 637Allied World 480 397 438Axis 1,324 1,264 1,303Endurance 783 869 573Everest Re 998 878 1,017Flagstone Re 361 242 207IPC 235 198 236Max Capital 434 307 214Montpelier 251 257 261PartnerRe 1,340 1,439 1,302Platinum 249 300 303Renaissance Re 598 527 633Validus 610 522 378White Mtn 1,146 1,178 1,202XL Capital 2,013 2,936 3,273

Q1 2009 Q1 2008 Q1 2007

ACE 3,194 2,940 3,082Arch 701 708 745Aspen 447 392 439Allied World 324 273 287Axis 665 659 685Endurance 378 372 377Everest Re 932 912 1,005Flagstone Re 173 135 101IPC 99 90 105Max Capital 190 136 139Montpelier 133 140 143PartnerRe 867 910 842Platinum 248 302 285Renaissance Re 302 309 363Validus 319 292 111White Mtn 911 929 938XL Capital 1,452 1,712 1,791

GROSS PREMIUMS WRITTEN $M

NET PREMIUMS EARNED $M


[ 13 ]

Net income (loss) attributable to common shareholders ($m) Fully diluted earnings (loss) per share ($)Q1 2009 Q1 2008 Q1 2007 Q1 2009 Q1 2008 Q1 2007

ACE 567 377 701 1.69 1.10 2.10Arch 140 189 199 2.24 2.78 2.59Aspen 91 81 122 1.39 0.85 1.27Allied World 131 131 114 2.57 2.55 1.83Axis 116 238 228 0.78 1.48 1.37Endurance 74 74 98 1.24 1.13 1.36Everest Re 109 78 298 1.77 1.24 4.59Flagstone Re 36 33 36 0.42 0.38 0.50IPC 8 83 73 0.15 1.31 1.07Max Capital 45 8 80 0.78 0.13 1.24Montpelier 52 0 73 0.61 – 0.76PartnerRe 133 120 161 2.32 2.16 2.76Platinum 84 103 70 1.58 1.76 1.08Renaissance Re 97 137 191 1.57 2.05 2.63Validus 95 66 57 1.20 0.85 0.94White Mtn 30 (57) 92 3.44 (5.38) 8.54XL Capital 178 212 550 0.53 1.19 3.06

Comprehensive income ($m)Q1 2009 Q1 2008 Q1 2007

ACE 337 88 775Arch 202 157 233Aspen 77 122 138Allied World 74 130 139Axis 64 224 259Endurance 71 83 116Everest Re 106 74 294Flagstone Re 38 31 35IPC 8 87 77Max Capital (18) 18 76Montpelier 51 (2) 73PartnerRe 113 190 185Platinum 83 101 82Renaissance Re 102 168 204Validus 95 67 57White Mtn (27) (21) 109XL Capital (873) (602) 491

Q1 2009 Q1 2008 Q1 2007

ACE 14,718 16,735 14,959Arch 3,630 4,005 3,783Aspen 2,832 2,923 2,509Allied World 2,492 2,395 2,356Axis 4,493 5,371 4,642Endurance 2,254 2,538 2,367Everest Re 5,040 5,633 5,197Flagstone Re 1,024 1,242 1,061IPC 1,849 2,148 2,054Max Capital 1,263 1,512 1,448Montpelier 1,437 1,570 1,560PartnerRe 4,282 4,473 3,907Platinum 1,830 1,929 1,937Renaissance Re 3,121 3,386 3,304Validus 2,023 1,991 n/aWhite Mtn 2,866 4,679 4,543XL Capital 6,141 9,255 11,313

n/a = data not available

Q1 2009 Q1 2008 Q1 2007Common shares issued Market value $ Common shares issued Market value $ Common shares issued Market value $

ACE 335,890,644 40.40 332,506,547 55.06 328,309,225 57.06Arch 60,532,222 53.86 64,649,618 68.67 73,746,726 68.21Aspen 82,762,673 22.46 85,395,154 26.38 88,133,866 26.21Allied World 49,522,766 38.03 48,841,837 39.70 60,390,269 42.75Axis 137,622,000 22.54 144,590,000 33.98 150,417,000 33.86Endurance 57,473,048 24.94 60,097,750 36.60 65,967,559 35.74Everest Re 65,700,000 70.80 65,500,000 89.53 63,200,000 96.17Flagstone Re 84,864,844 7.79 85,316,924 12.10 84,547,891 13.48IPC 56,092,672 27.04 55,947,610 28.00 63,848,158 28.85Max Capital 55,883,024 17.24 56,450,598 26.19 60,305,517 25.48Montpelier 87,448,434 12.96 94,505,314 16.05 111,778,122 17.34PartnerRe 57,874,268 62.07 57,580,543 76.30 56,704,414 68.54Platinum 51,163,377 28.36 48,923,952 32.46 59,825,816 32.08Renaissance Re 62,324,000 49.44 64,927,000 51.91 72,289,000 50.14Validus 75,828,922 23.68 74,230,410 23.43 n/a n/aWhite Mtn 8,854,086 171.91 10,570,234 480.00 10,833,788 566.50XL Capital 342,109,626 5.46 179,033,752 29.55 178,252,037 69.96

MARKET CAPITALISATION

COMPREHENSIVE INCOME FOR THE QUARTER

Q4 EARNINGS (LOSS) DATA

SHAREHOLDERS’ EQUITY ($M)n/a = data not publicly available


Patrick Thiele, President and CEO ofPartnerRe Ltd, said being named Bermuda’sReinsurance Person of the Year was all the

more satisfying after the challenges the industryfaced in 2008.

“It does mean more because of the difficultieseveryone’s had in the last year,” Mr Thiele saidat the awards ceremony at the FairmontHamilton Princess. “It feels a little more specialto be honoured at this time.”

The Bermuda Insurance Institute said ithonoured the genial and highly respected mid-westerner from Wisconsin for “his outstandingleadership, consistently positive company resultsand his unwavering support and promotion ofBermuda as a domicile.” It called his leadershipstyle “understated, modest and founded on hisown personal commitment to creating a well-managed company.”

Mr Thiele came to Bermuda in 2000 to takeover the reins of PartnerRe from its mercurialfounder Herbert Haag. He had previously beenGroup Director of Development of CGNU, andCEO and President of St Paul Companies’worldwide insurance operations.

He has spent eight and a half years as head ofPartnerRe, “which apparently makes me the thirdlongest serving reinsurance CEO in the world,”he quipped. “It’s not a long-lived profession!”

His — and PartnerRe’s — success, he said,had been down to “inheriting a very good com-pany from Herbert Haag and a little bit of luck.I joined PartnerRe at the end of 2000 just as themarket was turning. It was bad luck to have 9/11happen nine months after I took over, but themarket was in recovery and prices rose and wewere able to replenish our capital and move for-ward.

“Since then it has been a case of the under-stated virtues of stubbornness and conservatism.Reinsurance business is all about risk, takingrisk prudently and evaluating and valuing riskproperly. The achievement I’m most proud of isour risk culture. We take our risk very seriouslyand promise with absolute certainty that we willbe around for the claims and earn a decentreturn for our shareholders.”

Under his leadership, PartnerRe has success-

fully transformed from a cat-only reinsurer to adiversified global reinsurance company with 14offices worldwide offering coverage for propertyand casualty, catastrophe, specialty lines, life andalternative risk products. PartnerRe’s total assetscurrently exceed $16 billion, with total capitalgreater than $4 billion. For the year endedDecember 31, 2008, revenues were almost $4billion.

Since 2002 PartnerRe has grown its bookvalue per share at an 11 percent compound rate,its economic value per share at 13 percent, andincreased its shareholder dividend every yearsince incorporation, including 2009, when thecompany still managed to deliver a 12 percentoperating return on beginning equity for theyear. The company also maintained a strong bal-ance sheet and achieved a positive total returnon its investment portfolio.

The BII citation read: “In 2008 — a chal-lenging year all-round — PartnerRe maintainedits strong position in the market, preserved itsreputation and its client base and produced anacceptable set of results, all of which reflectPatrick’s commitment to intelligent risk man-agement and success over the long-term.PartnerRe’s track record speaks directly toPatrick’s excellent leadership and this successcan only reflect positively on Bermuda in its roleon the world stage, especially in the troubled cli-mate of today.”

Mr Thiele’s thoughtful approach and com-mitment to risk management and transparencymeans his opinion is sought and respected onindustry issues. Last year he represented theBermuda market at the InternationalRegulatory Dialogue in Brussels.

As Director and Deputy Chairman of TheAssociation of Bermuda Insurers andReinsurers, he has consistently called for appro-priate regulation and greater transparency, hasprovided support for the Bermuda MonetaryAuthority’s transparency working group, andtalked to the IMF on Bermuda’s regulatoryframework in their review of Bermuda.

Mr Thiele also constantly emphasises thefact that PartnerRe is “a Bermuda company”that boasts an 80 percent Bermudian workforce,including two-thirds of the senior managementteam in Bermuda. His corporate-giving policyensures a percentage of PartnerRe’s earnings aredonated to local charities each year.

“Yes we’re a global company, but Bermuda isour home,” he said. “The real value thatBermuda gives us is not so much the tax advan-tages, the proximity to the US markets, but thatit gives us a neutral home base. If I was based inParis, we’d be a French company, or if I wasbased in Zurich the company would have aSwiss culture, but each of our offices can havetheir unique culture under the neutral umbrellathat Bermuda gives us.

“People often ask me if the tax situation orthe regulatory environment changed would thecompany move. I always tell them it would takea lot to make us move because of everythingBermuda gives us.”

Thiele takes top awardin ‘challenging year’CHRIS GIBBONS MEETS THE WINNERS OF THISYEAR’S BERMUDA INSURANCE AWARDS

BII AWARDS

‘Outstanding leadership,consistently positivecompany results andunwavering support andpromotion of Bermudaas a domicile’

Patrick Thiele: Reinsurance Person of theYear and President and CEO of PartnerRe Ltd

[ 14 ]


Butt not ready to call time just yet…‘I DON'T CARE HOW I’M REMEMBERED. I CAREMUCH MORE ABOUT WHAT’S HAPPENING NOW’

He may have received a Lifetime AchievementAward from the Bermuda InsuranceInstitute but Michael Butt says it’s prema-

ture to call time on his more than 40 year careerjust yet.

The urbane 67-year-old Englishman won’tbe retiring as Chairman of AXIS CapitalHoldings Limited and AXIS Specialty Limitedfor another two and a half years, and he quippedthat the award should be changed to the “LifeSentence Award” as previous recipients DonKramer, Bob Newhouse, Bob Clements andBrian O’Hara are still active.

Besides, he said, he and CEO John Charmanstill have plenty of work to do taking AXIS, thecompany they formed in 2002, “to the nextlevel.”

He said: “The rocket’s taken off and we’vegone into orbit. Now the question is ‘do we stayin the same orbit or go into another one?’ It’sbeen relatively easy to grow the business recent-ly if you wanted to, but the profit factor wasn’tnecessarily evident. As always it’s a challengefinding the right balance.

“I think there are going to be a large numberof opportunities for quality capital and goodmanagement teams to continue to add value andgrow. It doesn’t have to be by acquisition.”

The BII award described Mr Butt “as astatesman, the consummate diplomat” respectedprofessionally and personally at all levels of theindustry. As Chairman of both The Associationof Bermuda Insurers and Reinsurers (ABIR)and the World Insurance Forum, and a long-time member of the Geneva Association, he has“long been a tireless contributor to Bermuda” as“a non-partisan sounding board for legislatorsand a leader in the efforts to establish Bermudaas a substantial and respected financial servicesjurisdiction.”

Mr Butt said: “One of the things I’m mostproud of is helping people to grow and helpingthe industry as a result. That matters to me a lot.People did it for me so it’s only fair to recipro-cate and try and multiply the effect.”

As a mentor, he stressed that “in this indus-try personal reputation over time is a critical fac-tor. I once told a group of young brokers that the

most important thing you can do is to build andmaintain your personal reputation for integrity.Don’t let anyone compromise that. You mighthave tough times short-term, but long-termthat’s the real value.”

Mr Butt played a pivotal role in the devel-opment of Bermuda as a global reinsurancecentre, although he is the first to admit that hissuccess has largely been about “being in theright place at the right time and knowing theright people.”

One of those people was Bob Newhouse, theformer Chairman of Marsh & McLennan, andthe place and time was Bermuda in Spring1992. Mr Newhouse invited Mr Butt to join theBoard of a new property cat reinsurer he wasforming called Mid Ocean Re, the first of thebillion-dollar ‘Class of 93’ start-ups.

“In September 1992, Hurricane Andrew hitand a small idea became a big idea,” he recalled.He was asked to take over as CEO of the newcompany in January 1993. The company wentpublic that summer and the rest is history.Bought by XL in 1998, it became the core of XLRe and from 1998 to 2002, until he joinedAXIS, Mr Butt was a Director of XL CapitalLtd, and a senior member of Brian O’Hara’sadvisory team that grew XL into a company

with significant US and European platforms.Mid Ocean and AXIS, he said, had been

“fantastic career opportunities.”He started his career in the London market

as Chairman of Sedgwick Limited and thenChairman and CEO of Eagle Star Holdingsplc and Eagle Star Insurance Company.Although he didn’t plan on being in Bermudafor 17 years, he is not surprised that the markethas flourished.

“From the mid-1970s onwards I could seethere were going to be different capital solutionsso I didn’t come to Bermuda being sceptical, Iwas optimistic that Bermuda could achieve asignificant role through the ability of capital toflow more freely and it to become a centre ofexpertise. Was I sure it was going to happen?No, but I saw it was a very real possibility. I stillbelieve it’s the centre of Bermuda’s success.Bermuda was originally a US solution up untilthe 1980s and we transformed it into a globalsolution.

“We are now the single largest concentrationof capital in our industry and that’s creating aself-reinforcing clustering effect of the market-place, which has really happened since 2001.”

As for his own legacy, Mr Butt insists that:“I don’t care how I’m remembered. I care muchmore about what’s happening now.”

‘The rocket’s taken offand we’ve gone intoorbit. Now the questionis, Do we stay in thesame orbit or go intoanother one? It’s beenrelatively easy to growthe business recently ifyou wanted to, but theprofit factor wasn’t necessarily evident’

Michael Butt: Lifetime Achievement Awardwinner and Chairman of AXIS CapitalHoldings Ltd and AXIS Specialty Ltd

[ 15 ]


For 30 years, Bala Nadarajah hasbeen one of the unsung heroesof Bermuda’s insurance andreinsurance sector.

Quietly working behind thescenes, the Sri Lankan-bornlawyer has been involved in virtu-ally every piece of legislation andregulation shaping the industrysince the historic Insurance Act of1978, including the BermudaCompanies Act.

Such has been his contributionthat at this year’s annual BermudaInsurance Institute Awards, theselection committee presented himwith a Special Award in recogni-tion of his “outstanding service tothe Bermuda reinsurance industry”and his “tireless work and greatpersonal sacrifices.”

Euromoney Expert Guide recent-ly called him “one of the world’sleading insurance lawyers” andwhile Mr Nadarajah is modestabout his achievements and says heis “humbled” by the award, hisexpertise and wise counsel werecritical in laying the vital ground-work for the Island’s rise as a lead-ing global reinsurance centre.

David Ezekiel, the Head of theAssociation of Bermuda InsuranceCompanies, who has workedclosely with Mr Nadarajah formany years, said he had been“invaluable” to the industry andBermuda.

“He was able to make the finerlegal points together with a practi-cal knowledge of the insuranceindustry. That made him prettyinvaluable, especially at the plan-ning stages of our industry.”

Mr Nadarajah first came toBermuda in April 1979 at the invi-tation of the late Shelton Burgess,then Registrar of Companies, tohelp formulate the regulationswithout which the Insurance Actcould not be implemented.

At the time, Mr Nadarajah hadsuccessfully completed a Master’sdegree in Law at GeorgetownUniversity in Washington DC,having moved to the US from hisnative Sri Lanka where he had

practiced English-based law for 16years.

He said: “I found Bermuda pro-vided an interesting challengebecause at the time there was noinsurance law in operation. Thecaptive growth was taking place inan environment with no insuranceregulation. In that respect Ibecame a useful conduit and facili-tator between the industry and thelegal draftsmen. There was a lot ofinsurance expertise around but itneeded to be harnessed and used togood effect.

“This award needs to be sharedwith all those insurance industryexperts, accountants and lawyerstoo numerous to name, who inter-acted very effectively with me,Shelton and others in govern-ment.”

Mr Nadarajah served as a LegalAdvisor to the Ministry of Fin -ance, the Registrar of Companies,the Bermuda Monetary Authority(he was Director from 2002-06when it became the industry regu-lator), and the Insurance AdvisoryCommittee. He represented theAttorney General’s Chambers in

the Private Bills Committee.During a spell as a consultant in

Washington, DC, from 1986-1993, he advised the Ministry ofFinance on US-Bermuda businessissues and relations before return-ing to Bermuda as a senior corpo-rate and insurance attorney in pri-vate practice. At Attride-Stirling& Woloniecki (ASW), where heestablished the firm’s CorporateUnit, he held the position of Headof Corporate. At 74, he is stillworking as Special Legal Counselto ASW.

Mr Nadarajah witnessed thedevelopment of Bermuda’s insur-ance industry from a captive domi-cile into one of the world’s leadingproperty catastrophe reinsurancejurisdictions. “We foresaw that thejurisdiction would expand intoother lines of business but not tothe extent it did. That has beenvery satisfying to witness.”

That the legislation couldaccommodate such growth, hesaid, was testament to its adapt-ability, along with its foresight onother issues, such as jurisdictionalcredibility and reputation.

“Back then Bermuda was pri-marily a captive domicile. Mostwere captives of Fortune 500 com-panies and it was important thatthe wrong type of company didn’tget into the mix and damage theentire jurisdiction’s reputation. Iflegislation that governed the cap-tive was inadequate or non-exis-tent, no one would reinsure thecaptive.”

He continued: “Not only didBermuda’s insurance law provide asolid foundation but we foresawthe need for adaptability and whathas become a global regulatoryyardstick these days called “risk-based assessment” was fundamen-tally ingrained in Bermuda’s insur-ance regulations and that’s why, in1995 when we created the Ber -muda insurance class system, it waspossible to do so without having torehash completely the work we hadpreviously done.

“The strength of the Bermudaregulations was that they can bendwithout breaking. They wereadaptable, they were reasonable,they were facilitative and it had thenecessary sanctions.

“One of the other strengths wasthe disclosure required of compa-nies in good faith. It was not a“catch me if you can” type of law.Solvency Declarations had to besigned by directors; the auditorswere given additional responsibili-ties to confirm that statutoryfinancial statements and returnswere prepared in accordance withthe Act and Regulations.

“Of course self-disclosure alonewas not sufficient, so appropriatesanctions were made available tothe Regulators from the very start,initially to the Minister of Fin -ance, and from 2002 to the BMA.The Bermuda Regulators havealways performed their rolesadmirably. With the expansion ofBermuda’s insurance business intothe commercial reinsurance mar-ket, ensuring that Bermuda was instep with global regulation becameessential, and Bermuda has risen tothe occasion.”

THE MAN WHO LAID THE GROUNDWORK FOR THE ISLAND’S RISE AS A LEADING GLOBAL REINSURANCE CENTRE

[ 16 ]

Special award for unsung heroBII AWARDS

Bala Nadarajah: Special Award for “outstanding service to theBermuda reinsurance industry” and “tireless work”


[ 17 ]

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Erica Symonds, AssistantVice President andExcess Liability Underwriterat XL Insurance (Bermuda)Ltd, has been namedBermuda’s YoungReinsurance Person of the Year.

The 35-year-oldBermudian, who graduatedfrom Rutgers University in1998 with a degree inMarketing, started her rein-surance career as a TechnicalAssistant at the now defunctNew Cap Re, and worked asa Casualty Broker for Aonbefore joining XL Insurance(Bermuda) Ltd in 2002 as an AssistantUnderwriter. She was promoted to her currentposition in April 2009, and is responsible for asignificant book of business comprised ofFortune 1000 companies.

She serves as the President of theBermuda International Chapter of theChartered Property Casualty Underwriters(CPCU) Society. She received her CPCU designation in 2006, and has also been instru-

mental in organising educa-tional workshops, seminarsand lunches for Bermuda’syoung people.

She said her proudestmoment to date as Presidentwas to bring the President ofthe worldwide CPCU Societyto Bermuda for the first timein January 2009 to a recep-tion to recognise a group oflocal young people whorecently received their CPCUdesignations.

Her other passion isworking with Bermuda’syoung people. Through theBermuda school-based

mentoring programme YouthNet, she servesas a mentor to two 10-year-old girls at theVictor Scott Primary School. She believes thatevery young Bermudian should be open toopportunities and strive for excellence.

“In the insurance industry we are competingwith people all over the world,” she said.“Being open to educational and career oppor-tunities is all a part of becoming a successfulglobal citizen.”

Erica earns top young award

Nigel Crow, Bradley Kading and Leila Madeiros Lawyer Rod Attride-Stirling with BMA CEO Matthew Elderfield

Andre Perez, of the Horseshoe Group, and wife Catherine Elizabeth Kramer, Ariel Re CEO Don Kramer and Zoe Butt

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Erica Symonds: career success

At the Awards


XL CAPITAL LTD has appoint-ed Elizabeth L Reeves asExecutive Vice President andHead of Global HumanResources. She joins XL from LizClaiborne Inc where she wasSenior Vice President and ChiefHuman Resources Officer. Shesucceeds Celia Brown who isretiring after 20 years.

XL INSURANCE has hired threeadditional underwriters from

Catlin for its London-based avia-tion business. The London teamwill be headed by Simon Murrayas Regional Manager – Aviation.He will be joined by ClassUnderwriters James Owen andAndrew Innes. Mr Murray hasover 20 years’ underwriting experi-ence in the London insurancemarket, most recently as SeniorAviation Underwriter. Mr Owenand Mr Innes have 15 and 14years’ experience respectively.

Andrew Carrier has been namedDirector of Underwriting at ARGOINTERNATIONAL (formerlyHeritage Managing Agency Ltd),a member of Argo Group Inter -national Holdings.

HARDY UNDERWRITINGBERMUDA has appointed PaulBailie, the former Chairman ofJLT Insurance Management(Bermuda) Ltd, as ManagingDirector of Hardy Bermuda. Mr

Bailie, who has been a Non-Executive Director of HardyUnderwriting Bermuda since itsestablishment in December 2007,will take up his new position inSeptember.

ACE LIMITED has announcedthat Brian Dowd, CEO,Insurance – North America, willtake up the additional position ofVice Chairman, ACE Limited andACE Group Holdings. In additionto his current responsibilities,which encompass ACE’s propertyand casualty insurance operationsin the US, Canada and Bermuda,Mr Dowd will now assume corpo-rate-wide executive responsibilityfor the ACE Group’s global prod-uct underwriting boards and thestrategy and purchase of the com-pany’s reinsurance programmes.

Bermuda-headquartered IRON-SHORE has appointed JohnReusch as Vice President ofProperty & Casualty Claims. Hewill be based in Simsbury,Connecticut, and joins Ironshorefrom Allied World AssuranceCompany where he managed theirUS direct, excess and reinsurancecommercial property and casualtyclaim operation.

IRON-STARR EXCESS AGE-N CY LTD has named formerAIG executive Michael War -wicker as Chief OperatingOfficer of Iron-Starr ExcessAgency Ltd, a joint venturebetween Ironshore Inc and StarrUnderwriting Agencies LLC.

The Bermuda-based EVERESTRE GROUP has appointedDominic J Addesso as Exec -utive Vice President and ChiefFinancial Officer. Mr Addessojoins Everest from Munich ReAmerica.

Constantine (Dinos) Iordan -ou, President and CEO of ARCHCAPITAL, has been appointed tothe additional position ofChairman of the Board, fromNovember.

PEOPLE

Reeves joins XL Capital

[ 18 ]


MEDIA WATCH

“This is the year you don’t bet the bank. Youpreserve capital … At Axis we (keep) surpluscapital because we like to be opportunistic …We are being killed on the yield, but when youare concerned about stability of financial mar-kets, better to be killed on the yield.“

— John Charman, AXIS Capital President &CEO, in a panel discussion at Standard & Poor’s

annual Insurance Conference in Brooklyn (Reuters)

“I don’t think that regulatory concerns are theissue for capital in Bermuda — the issue is thatcapital has not been available in any geography

over the last two years regardless of regulatory ortax-related issues. Bermuda is the third-largestinsurance market and the ability for tradingpartners to meet and conduct business in anopen market that is friendly to the encourage-ment of international business, is the key toboth the continuance and potential flourishingof this market.”

— Mitch Blaser, Ironshore Bermuda CEO, inReinsurance Magazine

“Bermuda-resident executives who may pro-mote Switzerland as safer than Bermuda, are

out of step with the majority view of Bermuda’sinsurance market leaders who view Bermuda asthe platform of choice from which to launchglobal operations.”

— Paula Cox, Finance Minister, on theredomiciling of some Bermuda-based companies,

in The Royal Gazette

“There are a lot of wounded animals out thereand people who are trying to preserve theirmarket share.”— Brian Nocco, XL Capital CFO, at Standard

& Poor’s annual Insurance Conference

[ 19 ]

Insurance | Bermuda | Reinsurance

Our research identifies two dominant

firms from the leading offshore market of

Bermuda. Flying colours for Attride-Stirling

& Woloniecki...Rod Attride-Stirling and

Jan Woloniecki won approval of clients

and competitors across the globe.

Who’s Who Legal – The International Who’s Who of Insurance

and Reinsurance Lawyers 2007

1 0 Y E A R A N N I V E R S A R Y

Y E A1 0

and

Jan Wo

& Wolon

Bermuda. F

firms from

Our re

Be m d|Ins ance

Reins ance|da

Bermud|Insurance

Reinsurance|da

Help the wounded animals!

ONSHORESeptember 9–1111th ALARYS Latin AmericanRisk Management andInsurance CongressFairmont Southampton,Bermudawww.bermuda-insurance.org

November (date TBC)Annual Standard & Poor’s/PricewaterhouseCoopers BermudaReinsurance ConferenceFairmont Hamilton Princess,Bermudawww.pwc.com/bermuda

November (date TBC)Goldman Sachs AssetManagement’s 5th AnnualConference for BermudaReinsurersFairmont Hamilton Princess

OFFSHOREAugust 11–13Vermont Captive InsuranceAssociationBurlington, Vermontwww.vcia.com

September 4–10Les Rendez-Vous de SeptembreMonte Carlowww.rvs-monte-carlo.com

October 22–24American Society for HealthcareRisk Management (ASHRM)Denver Convention Centrewww.ashrm.org

WHAT’S ON


[ 20 ]

CHARITY

Despite the recession, Bermuda’sinsurance market continues tobe a major supporter of worthycauses both on the Island andoverseas.

In May, former ACE executiveRoger Gillett completed a 296mile walk around the coast of hisnative Cornwall, England, to raisefunds for cancer research. MrGillett, who recently retired after30 years in the Bermuda market —he was President of ACE Risk

Management International andChairman of the BermudaInsurance Development Council(IDC) — took 16 days to completethe walk, and at press time hadraised more than $33,000 for theBermuda Cancer and HealthCentre. He was accompanied onthe walk by another recent retiree,Roger Scotton, former Head ofXL’s Media Relations, and under-took the walk in memory of hisbest friend Graham Sotheran,who died of a brain tumour inOctober 2008 aged 55.

Donations can still be madethrough the BCHC website atwww.chc.bm/RogerGillettsWalkforCharity.asp.

Meanwhile, BIQ ContributingEditor Chris Gibbons and wifeTracey, Vice President, NorthAmerican Casualty Treaty Re -insurance for Allied WorldAssurance Company, were amongthe many industry executives whotook part in the annual St.Baldrick’s event by shaving theirheads in aid of children’s cancerresearch and treatment. The cou-ple, joined by six year old sonToby, raised more than $40,000for their hair-raising experienceand, in total, the Bermuda eventraised around $500,000. World -wide, the event raised more than$15 million in nearly 600 loca-tions.

St. Baldrick’s was started in1999 by three American insuranceexecutives, John Bender, nowCOO of Allied World Re, TimKenny, President and CEO ofQBE Insurance Group, and EndaMcDonnell, President of AccessRe. It has now raised more than$50 million.

Giving back to the community

Mission accomplished for Roger Gillett, right, and Roger Scotton, atthe end of their walk around Cornwall

Charity baldies Chris, Traceyand Toby Gibbons

PH

OTO

SU

PP

LIE

D B

Y R

OG

ER

GIL

LETT


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