A safeguard on rough seas

ven as its tourism industry suffers, Bermuda's international business community is helping

Bermuda's strong financial services industry - which includes insurance, trust management and supporting professional services such as attorneys, accountants and bankers - is keeping the local economy on an even keel, officials say. "Economic times are tighter and business and consumer confidence is lower, but the numbers are still looking healthy," said Ifor Hughes, assistant financial secretary of international business in the Ministry of Finance. He was referring to the number of Bermudan exempted companies, firms that have a foreign interest of at least 80%.The number of exempted companies at the end of September totaled 12,620, up from 11,922 at the end of 2000 and 10,972 at the end of 1999, according to figures kept by the Registrar of Companies, which is part of the finance ministry.

$1.5 Billion Capacity Infusion

Foreign companies, many of which are in the financial services sector, generated slightly more than half of the country's gross domestic product, which was $2.6 billion for the fiscal year that ended in March of 2000. Bermuda has a per capita income is $42,321.

The insurance and reinsurance industry has been an important part of Bermuda's economy for several decades. Insurers based there are expected to suffer about $2.5 billion in losses stemming from the Sept. 11 terrorist attacks in the United States. Insurers around the world are expected to pay out claims totaling $30 billion to $40 billion.

To counter the losses, two new reinsurance facilities have been set up in Bermuda. The facilities will add $1.5 billion in for capacity for the industry and generate some economic activity and jobs for the island.

MMC Capital Inc., the Greenwich, CI=based private equity subsidiary of Marsh & McLennan Cos., has set up a new insurance and reinsurance company called AXIS Specialty Ltd. that will be capitalized at $1 billion.

RenaissanceRe Holdings Ltd., a reinsurer already based in Bermuda, is setting up Da Vinci Reinsurance Ltd. a property catastrophe reinsurer. Da Vinci will be initially capitalized at $500 million and may be expanded depending on market demands.

"I want to make clear that the WorldTrade Center event is an enormous human tragedy that we have all been touched by..we don't want to be seen as profiteering from the event," said John Lummis, executive vice president and chief financial officer at RenaissanceRe Holding. "It's had an important economic impact and has sharply increased the perception of risk in the insurance marketplace."

To meet the need for new capacity, Renaissance expects Da Vinci Re to be up and running for the industry's January 1 renewal season.The new facility will include a $200 million contribution from State Farm Mutual Automobile Insurance Co.

Renaissance decided that setting up a new facility was a better way to manage its equity capital than merely adding to its own capacity.

No Layoffs in Tourism

"We've developed a strong track record of prudent risk management and skillful underwriting," Lummis said. "It's positive for Bermuda because we'll need to hire people at the margins...we'll be writing more business and that's a positive sign.

Warren Cabral, a partner at the Hamilton law firm of Appleby, Spurling & Kempe, said he believed the diversification of the island's economy between tourism and financial services will help it survive the downturn more easily He noted that the hotels, restaurants and other facilities used by more than 500,000 tourists each year have not yet laid off any Bermudians. Instead, employers are cutting staff members' hours to keep everybody earning income.

"This has been devastating for tourism," Cabral added. "The question is can the institutions survive long enough to capture the business when it comes back."

-Paula L. Green