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In ThIs Issue

Message froM The Ceo

BerMuDa: one of The worlD’s preMIer offshore fInanCIal CenTres

BusIness frIenDly BerMuDa

BerMuDa anD ChIna sTrengThen TIes Through gooD CoMMunICaTIons

why BerMuDa Is aheaD of The CoMplIanCe Curve

BerMuDa seIzes Takaful opporTunITy

BusIness BerMuDa evenT suMMary

BerMuDa’s Ils resurgenCe

The BerMuDa CorporaTe gaMes

PROFESSIONAL COMMENTARY FROM BUSINESS BERMUDA

April 2012

N E X U STHE BUSINESS BERMUDA

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BUSiNESS | PROFESSIONAL COMMENTARY FROM BUSINESS BERMUDA

MESSAGE FROM THE CEO

CHERYL PACkwOOD CEO, BUSINESS BERMUDA

Bermuda forging ahead amid a changing international business environment

As we end the first quarter of 2012, Business Bermuda has continued an enthusiastic campaign of marketing activities and efforts that are

focused on delivering the message that Bermuda is ready and open for business.

There is often discussion about the efforts of Business Bermuda to generate interest and drive the growth of international business in the jurisdiction. with limited financial and human resources compared to competing jurisdictions, we have worked to cultivate the Bermuda brand through media relations, direct one-to-one marketing trips, participation in conferences, and active engagement to build, shape, and enhance the reputation and services that Bermuda offers the world.

The Bermuda brand is one that stands for innovation, excellence, and effectiveness in developing the financial services that enhance the free flow of capital around the world. we see this in the many real examples of the businesses that are domiciled and operating in Bermuda.

so, it should come as no surprise that when one of the world’s leading hedge funds sought a jurisdiction for the creation of a reinsurance company that would insure risks from around the world, it did so in Bermuda. To quote from a royal gazette article on Third point re, the company’s Ceo John Berger said, “There are many great advantages to Bermuda. It’s a very civil place with an established infrastructure and banking industry. The BMa 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. But overall, most importantly Bermuda is really a reinsurance centre.” (royal gazette, Third point re Ceo: ‘There are many great advantages to Bermuda’, January 27, 2012)

further to that point, when the TMX group, owners of the Toronto stock exchange, looked for growth opportunities, they made a strategic investment in the Bermuda stock exchange, a fully-regulated, world renowned and respected stock exchange

with a 24-hour functioning electronic trading platform that has been at the forefront of developing innovative capital markets products like insurance-linked securities. The leadership of greg wojciechowski, Ceo of the BsX, was key to the success of this transaction and so was the recognition of the importance of an offshore trading platform and exchange that can further advance the capital markets and the next generation of capital markets, products and services.

These are just a few of the many stories of growth and success that come as a result of the hard work of our service providers, business executives, and government officials, but they are also indicative of a brand – BerMuDa – that means something positive in international business.

It is often hard to measure the impact of brand on the decision-making process of executives in international business, but the good news about Bermuda can be seen in progress like this – even amid a still challenging world economic environment.

The legendary american social commentator and entertainer will rogers said, “even if you are on the right track, you’ll get run over if you just sit there.”

The difficult part of brand building is often times hearing more challenging feedback. and so, while we actively seek business on marketing trips and in meetings around the globe, we are also listening for the signs that we have work to do.

There is little doubt that Bermuda does have work to do in key sectors particularly in attracting funds to both register and physically domicile in Bermuda. There are many groups working in Bermuda to examine these challenges and Business Bermuda is an active part of those discussions offering our insights, experience, and perspective.

In fact, we have been on marketing trips to new york and washington, DC twice in february and March. The goals of these meetings were threefold:

• Establish and build a personal relationship and point of contact with the commercial attachés and lawyers;

• Listen, learn, and understand the key forces in the market that are driving business decisions so that Bermuda’s marketing efforts can be more effective;

• Provide information/background on Bermuda’s international business community (regulatory/actual) and offer several ideas for immediate cooperation.

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working in partnership with pam Burrows from the Ministry of finance, Business Bermuda conducted a set of marketing meetings with key sources of international business. The meetings have included:

• Michael Tannenbaum, Partner, Tannenbaum Helpern Syracuse & Hirschtritt, LLP

• Mexican Consulate

• Brazilian Consulate

• Turkish Consulate

• Canadian Consulate

• Kenyan Embassy

• United Arab Emirates Embassy

• Vietnamese Embassy

• Indian Consulate

• Australian Consulate

• Patrick Sweeny, Partner, Herrick Feinstein LLP

• Peter Driscoll, Partner, Orrick, Herrington & Sutcliffe LLP

These meetings have led to powerful insights, broadened opportunities and direct interest in closer, cross-border business relationships. In addition, they have allowed for Business Bermuda to open the door to greater dialogue and opportunities for its service providers in international business and our government.

as you read this newsletter, we will be in China with the Ministry of Business Development and Tourism meeting with key leaders of government and business in shanghai and

Beijing. our presence there builds on efforts from more than a year ago in hong kong where we met with representatives of the China Council for the promotion of International Trade. In Beijing, we have secured a high profile speaking opportunity for the honorable wayne furbert, Jp, Mp, Minister of Business Development and Tourism, who will talk to attendees at the Chinese enterprises outbound Investment Conference. working with me, he will discuss Bermuda’s attractiveness as an international business jurisdiction and focus specifically on some of the opportunities for Chinese investment in key tourism and infrastructure development projects in Bermuda.

In addition, we will be in london for the annual Bermuda financial services Conference, which will enable us to reconnect with our traditional business partners and continue to deliver the message on Bermuda’s products and services.

Business Bermuda is delivering on the investment and resources of government and its members to build the Bermuda brand and create an environment that will allow our service providers and international business partners to further grow and develop. we thank all of them, and you, for your ongoing support for Business Bermuda and your interest in international business in Bermuda.

Together we are accomplishing much, and we have more to do in the months ahead. •

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Bermuda’s credibility and international recognition is a result of its long established reputation founded on the quality rather than quantity of the financial transactions that originate there.

The Island has long been regarded as an exceptionally well-regulated jurisdiction largely as a consequence

of the oversight of the Bermuda Monetary authority (“BMa”) which screens those individuals who wish to do business from or within the Island.

as a leading offshore centre, Bermuda has all the essential components necessary for a robust international business community. some of the many advantages of doing business in Bermuda include its progressive regulation regime, lower tax jurisdiction, its location, the wide availability of experienced service providers and the quality of life that is enjoyed on the Island.

PROgRESSIvE REgULATIONThe BMa has sole responsibility for the regulation, supervision and inspection of financial institutions operating in or from within the jurisdiction. The BMa has developed a risk-based approach when supervising these financial institutions which allows them to concentrate their resources on those firms which pose the greatest risk.

The BMa uses a common, core set of supervisory tools across all sectors of the business community for purposes of risk assessment. These tools include identifying risk impact groups and prioritization, fundamental monitoring, prudential visits, risk assessment models and enhanced monitoring via on-site programs. This risk-based approach has been endorsed by the International Monetary fund as well as a number of varied international regulatory and standard setting bodies.

TAX EFFICIENT JURISDICTIONas a tax-neutral jurisdiction, Bermuda does not tax profits, income, dividends or capital gains. profits can be accumulated, and there is no obligation or requirement to pay dividends. In fact, Bermuda’s only corporate-related tax is in the form of payroll tax, which is paid on all employees within a company at a maximum rate of 16%.

This is lower than, or equivalent to, most other competing jurisdictions. By comparison, switzerland’s corporate tax rate currently ranges from 11.8% to 24.2%, depending on location

within switzerland, whilst Cayman which also does not tax profits, income, dividends or capital gains does however levy annual work permit fees of approximately two to three times that of Bermuda’s payroll tax. finally, the united kingdom charges 28% capital gains tax and 40% - 50% income tax.

LOCATIONBermuda is conveniently located in the Mid-atlantic between the united states and europe, approximately 600 miles directly east of north Carolina. Bermuda enjoys easy access to many eastern north american cities such as new york, Boston, atlanta, Toronto, washington D.C., philadelphia and Miami as well as numerous direct flights to london. accessibility to these gateway cities makes Bermuda an ideal place for an international company to be domiciled as it is critical to be able to have those all-important face-to-face Board meetings, which allows companies to derive maximum benefit from the Island’s tax regime as well as minimizing adverse tax liabilities in the united states and the united kingdom.

In addition, the Island’s time zone is four hours behind gMT and one hour ahead of us east Coast time which makes it a convenient location from which to conduct business with those customers, colleagues, partners and suppliers that are based abroad.

EXPERIENCED SERvICE PROvIDERSone of Bermuda’s strongest points is the wealth of expertise that is available from a wide range of experienced service providers that are either home-grown, or have been attracted to its shores from overseas. These high-caliber service providers which include, but are not limited to, legal, fund administration, banking, auditors, insurance and telecommunication/technology/e-commerce offer international companies the depth and breadth of highly-skilled professionals needed to carry out complex business transactions on a global scale.

In addition, the Island has a legal system founded on english law, a well-educated, literate population two-thirds of whom are of working age, and it enjoys one of the world’s highest per capita incomes. as a consequence, the Island is able to not only attract but also retain talented professionals of the highest quality.

APEX’S LONg TERM COMMITMENT TO BERMUDABermuda was apex’s first office nearly eight years ago and since then the Bermuda office has been the spring board for the Company’s expansion into 20 other jurisdictions around the world.

This growth is very much at the heart of apex’s philosophy of providing personalized fund administration services by

BERMUDA: OnE OF THE wORlD’SPREMIER OFFSHORE FINANCIAL CENTRES

PETER HUgHESAPEX FUND SERvICES

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being based in the same location as our clients. This enables us to build working relationships with our clients so we can properly understand their businesses, their local regulatory frameworks and help them grow their businesses.

with the regulatory system continuing to tighten, the apex global network, which originated in Bermuda, is increasingly demonstrating its strength. fund managers can benefit from an increasing level of risk management services as well as services that provide greater efficiencies. Two examples of these products recently launched by apex include apex funds 247 and afos.

for Bermuda to remain competitive, other service providers located in Bermuda also need to increase the range of services they provide and critically continue to invest in new technologies.

CONCLUSIONBermuda’s reputation as the leading offshore business jurisdiction is a result of having the aptitude to provide

business solutions in many areas of international business including; fund administration, insurance and reinsurance, banking and e-commerce.

having a sound regulatory approach and a mature business infrastructure, Bermuda has been able to distinguish itself from other competing jurisdictions as well as secure its premiere position in the eyes of the international business community. all of this allows for a streamlined process when establishing or incorporating a business on the Island. •

...Bermuda’s only corporate-related tax is in the form of payroll tax, which is paid on all employees within a company at a maximum rate of 16%.

This is lower than, or equivalent to, most other competing jurisdictions. By comparison, Switzerland’s corporate tax rate currently ranges from 11.8% to 24.2%, depending on location within Switzerland, whilst Cayman which also does not tax profits, income, dividends or capital gains does however levy annual work permit fees of approximately two to three times that of Bermuda’s payroll tax.

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There is an emerging trend among private equity (PE) asset managers. More and more PE asset managers are carefully evaluating their global corporate structures in search of ways to optimise their operations and growth potential. The choice of where to do business is an important, inevitable decision that all PE asset managers must face when looking to build an effective global corporate structure.

when selecting a jurisdiction, pe asset managers have three main considerations: a location in which investors have confidence and will facilitate access to capital; a location providing the most appropriate structures and vehicles, suitable for both investors and investment strategies; and, a location effective and efficient for pe asset managers do to business from, for both personal and business reasons. a number of must-have qualities vault to the top of the list: reputation; access to global capital; effective regulatory environment; efficient tax regime; strong infrastructure and stable government; and, available talent.

Bermuda is the offshore financial centre of excellence with the most convenient location to service us, european and latin american markets. Bermuda’s tax efficiencies create an opportunity for the establishment of global fund platforms and locally based asset management and advisory functions, enhancing the ability to attract capital on a global basis. not only a domicile of choice for offshore structures, Bermuda also plays an important role in facilitating capital-raising activities and cross-border investments.

More and more investment professionals are interested in relocating to Bermuda to take advantage of: political and economic stability; an avowedly business-friendly government that understands the importance of a well-regulated

international business sector; a safe environment; easy access via north american and european gateways; tax efficiencies; deep pools of talent; and, regular visits by high-calibre investors, professionals and business leaders.

regular dialogue between Bermuda’s international business community and government encourages regulations that are innovative, while preserving the highest standards of conduct. This approach to regulation accommodates a variety of structures for both hedge fund and pe products, and for asset managers themselves, including Bermuda segregated account companies.

Bermuda’s asset management industry is regulated by the Bermuda Monetary authority (BMa), with legislation that provides a statutory basis for regulating the establishment and operation of funds and certain asset managers. The BMa’s regulation also provides for the licensing and supervision of Bermuda fund administrators. The regulations themselves are designed to be commensurate with risk investment products with exposures only to institutional or sophisticated investors, who rely less on a public regulator, enjoy a significantly lower regulatory burden than retail investment offerings.

Bermuda has an extraordinary concentration of intellectual capital, with administrators, lawyers, audit and tax professionals and independent directors with a history of dealing with international structures and complex products. Their experience working with emerging markets can provide a high level of customised service. Bermuda’s deep pools of intellectual resources and trusted regulatory framework have contributed to its emergence as a domicile fit for purpose. Bermuda also has a pool of internationally experienced non-executive directors that can provide ‘mind’ and management, evidence of substance of activities, and independent and objective oversight.

Bermuda maintains a significant number of administration firms with skill sets spanning the hedge and pe markets,

BUSinESS FRiEnDly BERMUDA

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in addition to supporting family offices. These firms service Bermuda-domiciled entities, as well as many entities domiciled in other jurisdictions. Bermuda is emerging as a strong choice for pe houses, as these teams look to provide options and opportunities for their business and their people; in addition, it remains a jurisdiction strong in servicing the hedge fund industry, with boutique administrators providing highly customised, personal service in well-controlled environments.

asset managers also choose Bermuda for their key operations because it offers one of the world’s highest standards of living and provides an efficient tax structure, both corporate and personal. Bermuda-exempted entities are provided a period of tax assurance to March 2035, under the exempted undertakings Tax protection amendment act 2011, such that certain taxes would not, if introduced, be imposed on these entities.

Making the choice to operate your asset management business in Bermuda is a critical first step; setting up your operations in an efficient and effective manner will enable you to gain the benefits that Bermuda offers. pwC can advise you on how to set up and position your business to gain those benefits. pwC Bermuda, as a leader in the asset management market, has been servicing asset management clients for over 40 years including some of the largest asset managers and funds domiciled and administered in Bermuda and other

jurisdictions. The firm has a dedicated asset management practice with extensive audit, tax and advisory expertise and draws on international tax and transaction services know-how from the global pwC network. we can work with your existing business advisers to provide you with the best advice, make introductions to quality service providers, and can arrange

for you to meet with the BMa and government officials. our executive search and selection professionals can assist you to find the right talent on Island or elsewhere.

Bermuda has a long history of providing the qualities so critical to building an effective global business structure. Bermuda’s geographic location positions the Island as a financial hub with convenient access to global capital. The regulatory environment promotes innovation and flexibility at the appropriate level of oversight. The tax regime is efficient and beneficial for both corporations and individuals. and the government is committed to the growth and expansion of the asset management industry. for all

of the above reasons, Bermuda has become a recognised and sophisticated jurisdiction for asset managers and a servicing centre for many pe funds. •

Bermuda maintains a significant number of administration firms with skill sets spanning the hedge and PE markets, in addition to supporting family offices. These firms service Bermuda-domiciled entities, as well as many entities domiciled in other jurisdictions. Bermuda is emerging as a strong choice for PE houses, as these teams look to provide options and opportunities for their business and their people; in addition, it remains a jurisdiction strong in servicing the hedge fund industry, with boutique administrators providing highly customised, personal service in well-controlled environments.

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BACkgROUND OF BERMUDA-CHINA TIESon December 2, 2010, Bermuda and the people’s republic of China signed a TIea (Tax Information exchange agreement). at the signing, Bermuda’s premier The hon. paula Cox, Jp, Mp and wang li, the Deputy Commissioner of the state administration of Tax, both commented that the agreement represented ‘a significant step forward in cementing ties between Bermuda and the prC’.

news of the agreement won significant media attention in China. leading business papers economic observer, China Business, shanghai Business, and China Business Times covered the story. In addition, all major online portals including sina, sohu, and Tencent gave the news significant attention.

Bermuda’s ties with China continue to deepen. There are now over 700 entities with Chinese interests registered in Bermuda. The signing of the TIea and subsequent media coverage highlight Bermuda as a premier jurisdiction for Chinese business interests that also has the stamp of approval from relevant Chinese authorities. while any new partnership has its challenges, there remains a wealth of opportunity available for both Bermuda and China through deepening this mutually beneficial relationship.

CHINA – THE POLITICAL CONTEXTChina’s 12th five year plan (2011-2015) was approved by the national people’s Congress (npC) on 14 March 2011 with the goals of creating an environment for more sustainable growth by prioritizing more equitable wealth distribution, increased domestic consumption, and improved social infrastructure. The plan shows a major change in the thinking of the Chinese leadership. China is moving from an export-based economy to an investment-led, value-added service-based model that builds its domestic consumption as China’s overall wealth increases.

CHINESE wEALTHone of the major challenges that China’s leadership faces is the uneven distribution of wealth across China’s population. according to the world Bank, over 15% of China’s population lives on $1.25 a day equalling around 200 million people, with 21.5 million people in absolute poverty (less than $90 a year). In contrast, according to the hurun rich list published in september 2011, China is now second in terms of having the most dollar billionaires (271) in the world, proceeded only by the us (400). China also boasts over one million millionaires. The world luxury association’s official report on 2012 shows that China has become the world’s largest consumer of luxury goods. The report predicts that total consumption of luxury goods is expected to reach 59 billion euros – a record high.

CHINESE BUSINESSThe 12th five year plan (fyp) highlights two significant opportunities for Bermuda through the introduction of business-focussed initiatives:

1. “foreign investment is welcomed in modern agriculture, high-tech and environment protection industries;”2. “encourage qualified enterprises to list on stock markets; In-depth reform in monopoly industries for easier market entry and more competition”

In addition to the business initiatives of the fyp, during the recent npC meetings in March 2012, state Council premier wen Jiabao explicitly stated in the report on the work of the government that “structural tax reduction” will be taken as one of the important jobs this year. There is now a much more relaxed public opinion on tax efficiency in China: a great opportunity for Bermuda in China.

as China looks to finance its continued growth, jurisdictions like Bermuda offer clear advantages to support this growth.

THE OPPORTUNITYoverseas listings – There is a great increase in the number of Chinese companies listing overseas as well as international companies listing in hong kong as a platform for the mainland Chinese market. offshore jurisdictions, such as Bermuda, are the traditional choice for incorporation purposes.

Domicile for funds – Bermuda offers an excellent environment for China-focussed investment funds.

private equity – China’s high net-worth Individuals (hnwIs) need more sophisticated and secure ways to manage and protect their wealth, an area of expertise in Bermuda.

(re) insurance – China’s re-insurance industry is underdeveloped, yet, it is a country that suffers major natural disasters every year. It currently does not spread its risk efficiently resulting in wasted capital that could be used for other purposes. Bermuda’s highly developed (re) insurance market can serve to fill this gap.

THE COMMUNICATIONS CHALLENgEDespite the major opportunity for Bermuda, there exists a communications challenge.

Interviews with senior Chinese government officials and business leaders show that the perception of Bermuda as an offshore jurisdiction is understood, but the specific strengths, products, and services are not known. also, there is a generally negative perception of Bermuda and other offshore jurisdictions due to a lack of information.

In comparison to other offshore jurisdictions Bermuda’s level of activity in China is relatively low. This means other jurisdictions with a strong marketing effort in the region are gaining more business-generating visibility than Bermuda.

BERMUDA AnD CHinA STREnGTHEn TiES THROUgH gOOD COMMUNICATIONS

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RECOMMENDED ACTIONSgiven Bermuda’s strengths in financial services, re-insurance in particular, and for supporting overseas listings and funds, it is clear these advantages need to be communicated more clearly to the Chinese market. The approach should be ‘quality over quantity’ where Bermuda communicates its message to key decision makers in China.

In april 2012, Bermuda’s Minister for Tourism and Business Development, The hon. wayne furbert, and Business Bermuda Chief executive officer, Cheryl packwood, led a business delegation to shanghai and Beijing. The visit to both cities consisted of holding meetings with representatives of China’s government and business leaders to seek advice from people on the ground on how Bermuda can build on its success to date in China.

Media briefing sessions were held to communicate Bermuda’s strengths to the Chinese press and raise the level of understanding of Bermuda’s advantages over other jurisdictions.

Bermuda and the prC will continue to work together as vice Chairs of the oeCD global forum steering group and to build and strengthen commercial ties. for Bermuda to gain a clear competitive edge, the annual China financial services road show serves as a platform for Bermuda to learn more about the Chinese marketplace, establish the appropriate relationships, and quantify Bermuda’s stellar reputation in an effort to further cement its global leadership role as the premier jurisdiction for Chinese business. •

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with the EU’s AiFM directive set to come into force soon, it may come as a surprise to some people that Bermuda is already in position to meet those standards. But for those who know us better, it is business as usual. Because meeting international standards of regulation is not something we do reluctantly - it is at the heart of who we are. To build a successful financial centre, we need to provide what the top fund managers need when they are choosing their destination. and, when we talk to these people, we find that international-standard regulation is always towards the top of their list. Media caricatures may suggest that financiers want to be given a regulation-free environment, but the best people want to compete on a level playing field, not in a system that lets the unscrupulous get ahead. and, they want to know that there is a stable environment they can rely on so that the business they build today will not be blown away by hurried regulation tomorrow. when it comes to attracting business, we cut costs - not corners. The cornerstones of Bermuda’s financial services industry are regulation and rule of law. Bermuda is a well regulated, transparent and compliant destination. To attract people away from international financial centres in cities like london and new york, we need to offer a location that people can trust to offer the same security for their assets.

That is why we have levels of disclosure that put us on the oeCD white list; why, unlike others, we’ve never been sanctioned for failing to uphold these standards; and, why, unlike any other offshore jurisdiction, we are vice Chair of the steering committee of the oeCD’s global forum. In our opinion, being an offshore jurisdiction should not be an excuse for failing to meet the standards that people rightly expect. so making sure that we meet the requirement for a new international directive is not something we are forced into doing – it is the sort of thing we thrive on. of course, we know that a secure business environment means more than just good regulation. Bermudian law is based on english Common law – so, we are in a system that is used across the world and that has been tried and tested over centuries. It is familiar, transparent and fair; it means that people can invest with confidence, knowing that they will not be vulnerable to the whims of an unpredictable legal system. and, if and when disputes arise, a simple arbitration process is easily available to iron out any issues fairly and efficiently. But while we are tough on wrong-doers, we are not the sort of jurisdiction that imposes arbitrary rules. The Bermuda Monetary authority has long held a policy of working closely with the firms it regulates. potential problems can be spotted more easily, because we know the people involved, but it also means that they will always consult with the people who will be affected before regulations are implemented. as a result, the regulations work in practice, not just in theory, and rather than

wHy BERMUDA iS AHEAD OF THE COMPLIANCE CURvE

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coming out of the blue, they are adopted in a way that means you can adapt in advance. while we provide a stable environment in which to invest, we also strive to make the system work in other ways. working in Bermuda does not come with the burden of excessive costs. we have a tax neutral environment in which international businesses can operate effectively and efficiently. keeping costs down never goes out of fashion, but in a world where high public debt is increasing the pressure on large economies to raise taxes and hostility towards the finance industry is making conditions more difficult, it becomes even more important to be able to keep more of the business’ profits for the business to create jobs at home. Importantly, our infrastructure is world-class. In the modern world, business is regularly conducted across borders and a fund manager needs to monitor his investments in london, lisbon and lahore. In this world, what matters is less where you are on the globe and more how easily you can connect to the rest of it. so, we have focused on providing the connectivity and the technology you need in order to conduct business anywhere in the world. we have some great people in Bermuda. of course, a centre like ours is always going to have great fund managers and service providers, people who are among the best in the world at making your money work harder and go further. But we also

have all the other people you need if your business is going to succeed. all the big four accountancy and auditing firms and number one offshore law firms have made their home in Bermuda. These are just some of the businesses who help to keep things running smoothly. we have a wide range of well-trained professionals throughout the financial services industry. This not only means that you have a strong pool of talent to draw on, it also means that we have the capability to go beyond standard products and operations. Because of the people who live and work here, Bermuda offers access to, for example, the international reinsurance market and niche investment funds. Indeed, 75 percent of the fortune 100 are domiciled in Bermuda. In order to attract international financiers, we offer a jurisdiction that matches international standards step for step. That is true whether those standards are the quality of regulation you expect, stability and the rule of law, or infrastructure and personnel. we do this in a way that keeps your costs down and lets you keep more of the money that you earn. In Bermuda, you can have european levels of regulation and stability without european levels of bureaucracy and cost. In a world where doing business is tough, we are working hard to make your job easier. •

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it is not by accident that Bermuda has grown into the world’s largest insurance and reinsurance centre. The island is constantly alert to changes in the organisation of global business that may have implications for how companies choose to organise their insurance requirements. As a result, Bermuda has the world’s most supportive legal and regulatory framework, an established captive insurance and reinsurance market and all the support professions and services that a business may need.

already Bermuda’s Islamic finance sector is large and growing fast. and its working partnerships with Middle east financial centres such as Bahrain have been diligently fostered, in order to develop synergies and mutually beneficial deals. Thus Bermuda was a prominent participant in the 18th annual world Islamic Banking Conference held in Bahrain. so it is no surprise that Bermuda has invested resources and expertise in providing a highly supportive framework for the takaful and retakaful industry. Bermuda now can fairly claim to have world class accounting, banking, legal, e-business, trust and management services for shariah compliant institutions.

This has enabled Bermuda to become an increasingly trusted jurisdiction for structured financial transactions, such as sukuk and shariah compliant funds, including private equity funds. The Island has, for example, become a world pace setter for sukuk issuance for aircraft financing.

The next logical step is to achieve the same central role in takaful. we are not deterred by the fact that the global downturn slowed the growth of takaful just as it hit every aspect of the insurance industry. The evidence still suggests that, overwhelmingly, takaful is set to continue as the fastest accelerating area of insurance in the world.

This takaful trend now applies to western economies as well as Islamic jurisdictions. one element of takaful, and indeed of Islamic finance in general, that has growing appeal in the west is its powerful ethical component at a time when conventional international finance is not always seen in a strongly ethical light. The principle of sharing risk and reward has wide appeal, as does the fact that Islamic finance nowadays has become just as efficient as its more elderly rivals.

not long ago Islamic finance was too small a component of the global market to attract much attention. Its new professionalism and phenomenal growth have happened so fast that global awareness has not kept up with the changes. This international veil of ignorance will soon be swept away as more people realise we are talking about what is now a trillion dollar industry – as large as the entire economy of a global giant such as India and still growing at way above industry speed. analysts at pwC expect the market to double in the next five years to an eye watering two trillion dollars.

Bermuda is well placed to take advantage, not least in takaful and retakaful. we signed in 2010 a double taxation agreement with the kingdom of Bahrain which has opened up structural opportunities for both conventional and shariah compliant investors eager to access the oil and gas rich nations of the gulf Cooperation Council (gCC), which is itself now a trillion dollar market.

BERMUDA SEizES TAkAFUl OPPORTUniTy

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inTERnATiOnAlCAlEnDAROF EvEnTSApril 2012 April 24 [Mandarin Oriental, london] annual Bermuda financial services ConferenceApril 25-26 [paris] eurohedge Investment summit

MAy 2012May 14-16 [The ritz-Carlton, Grand Cayman] sTep CC12 Caribbean Conference

May 22-24 [Suntec, Singapore] shorex wealth Management forum singapore

May 24 [Singapore] singapore financial services reception

May 28 [Hong Kong] hong kong financial services reception

SEpTEMBEr 2012September 10-11 [Chicago] Captive live usa

OCTOBEr 2012October 4 [New york] annual Bermuda financial services Conference

October 23-25 [london] Diversified assets show

NOvEMBEr 2012TBD [Toronto] Toronto financial services reception

November 12-15 [Johannesburg] hedge funds world africa

DECEMBEr 2012December 9-11 [Bahrain] world Islamic Banking Conference

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lOCAlCAlEnDAROF EvEnTSMAy 2012May 7-8 [Fairmont Southampton] 10th annual family office symposium

May 10 [richmond House, par-la-ville road] free seMInar - what you Don’t see Might hurt you

JUNE 2012June 3-6 [Fairmont Southampton] Bermuda Captive Conference

June 7 [richmond House, par-la-ville road] free seMInar - I’ve got the Job, now what?

June 12-13 [Fairmont Hamilton princess] Insurance Day summit Bermuda

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Business Bermuda is the organisation tasked with working with both the private sector and the government to ensure that Bermuda’s international financial centre meets the real needs of international businesses whether Islamic or conventional.Bermuda’s traditional links with a whole range of different regions enables it to first identify and then supply the requirements of a remarkably diverse range of users of takaful and other shariah compliant products and services. In spite of a widespread assumption that takaful on any large scale is confined to the gCC markets, the reality is much more interesting.

It is certainly true that takaful remains a strong market in saudi arabia because of the continued roll out of compulsory medical insurance. But, as measured by regions, the latest comparative figures for 2011 indicate that takaful contributions in the Indian subcontinent grew by no less than 85 per cent, making it the world’s fastest growing takaful market. some way behind has been the levant, with a nonetheless impressive 40 per cent. The gCC, at 31 per cent, comes in only third and barely ahead of south east asia and africa. In terms of individual countries, Indonesia topped the takaful market, closely followed by Bangladesh and with saudi arabia some way behind in third place.

looking ahead a few years, it is noteworthy that the gCC is perhaps the most competitive market in the world, with the largest number of players and the largest capacity for growth.But, as the market grows, problems will arise that will preclude many jurisdictions from benefitting to the degree they might expect. for instance, the primary takaful market cannot keep growing – and be truly compliant, in the judgment of many Islamic scholars – unless it is matched by the development of a reasonably sized retakaful market.

This is where Bermuda is ahead of most of the competition, since it already has in place the legislative and regulatory structures to accommodate retakaful as well as primary takaful structures.

These structures are practical and realistic and responsive to industry needs because they are the result of cooperation between the Bermuda Monetary authority and the industry. as a result, takaful and retakaful operators can tap into Bermuda’s resources to leverage access to capital as well as expertise, products and systems. and they can confidently

do so without risk of the uncertainty, excessive profit, usury and gambling that can bedevil conventional insurance.

The Bermudian authorities fully appreciate how important it is to honour the key distinction between conventional and takaful insurance – namely the relationships between the insurance company and the policy holders. Bermuda is also sensitive to the fact that there is no “one size fits all” approach to takaful, and so the most suitable structure will depend on the particular product in question. Bermuda’s commitment to helping develop Islamic finance is likely to prove highly advantageous both to the industry and to the Island.

Bermuda, lying 660 miles east of the american coastline, has certainly come a long way since it was first settled by British sailors shipwrecked on their way to the “new world” of virginia in 1609. now Bermuda has travelled a comparably long way in developing the “new world” of takaful and retakaful insurance. •

not long ago islamic finance was too small a component of the global market to attract much attention. its new professionalism and phenomenal growth have happened so fast that global awareness has not kept up with the changes. This international veil of ignorance will soon be swept away as more people realise we are talking about what is now a trillion dollar industry – as large as the entire economy of a global giant such as India and still growing at way above industry speed. Analysts at PwC expect the market to double in the next five years to an eye watering two trillion dollars.

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Bermuda has long been recognised as a sophisticated and responsibly regulated international financial centre. with a well-developed infrastructure, proximity and convenient air links to the US, Canada and the Uk, and a wealth of experienced and sophisticated service providers, the island has naturally become a focal

point for innovation in the financial sector.

In particular, Bermuda is considered the centre of catastrophe reinsurance expertise and is one of the largest reinsurance markets in the world,

estimated to provide over 50% of the worldwide property catastrophe capacity, along with other innovative general and long-term insurance business products. The combination of an extraordinary concentration of insurance talent with a responsive and flexible regulatory environment has led to the island leading the industry in the development of sophisticated insurance and reinsurance structures.

In addition to its breadth of insurance industry experience, Bermuda is also a major centre in the international investment fund industry, with over us$200 billion of fund assets domiciled here, and over 2,000 investment funds registered in and operating from Bermuda. There are also a significant number of unregulated investment funds, primarily closed-end investment companies and limited partnerships.

all this positions Bermuda at the heart of the increasing convergence of the capital markets and the insurance/reinsurance industry, making Bermuda a natural jurisdiction for the development of sophisticated insurance-linked securities (“Ils”) products and the establishment of Ils funds specialising in investment in such products.

SPECIAL PURPOSE INSURERSa particularly important recent catalyst for the surge in the Ils product development in Bermuda was the introduction in 2009 of legislation to create special purpose Insurers (“spIs”). This new class of insurer was developed in order to provide a cost-efficient and appropriately regulated corporate vehicle for the increasingly popular fully-funded insurance transactions. Initially focused on attracting cat bond and insurance sidecar transactions to Bermuda, the spI structure has proven to be

very useful for these and other fully-funded and sophisticated products.

essentially, where an insurance company is being established solely to enter into one or a series of fully collateralised insurance transactions, that company may register as a spI, provided that the various participants in the transaction are sophisticated and the Bermuda Monetary authority is confident that all parties have received adequate disclosure regarding the nature and effect of the contract in question.

The spI legislation and related regulatory guidance notes recognise the relatively low risk inherent in an insurer only writing one or a limited number of fully collateralised contracts and the regulation of an spI reflects the same. for instance, the minimum share capital for an spI is $1.00, the regulatory solvency margin is simply that assets must exceed liabilities, there is no requirement for a loss reserve opinion, no regulatory approval is required for the return of capital and in most circumstances a waiver of the statutory audit may be obtained. The annual spI license fee is currently set at $11,600, and spIs enjoy an efficient and well structured incorporation and licensing application process with the BMa (even more so than with traditional insurer structures). The result of these regulatory characteristics is a very cost-efficient structure, where the focus can be very much on developing the product in question.

as the essential requirement for an spI is that the transaction is fully collateralised, the spI licence can be and has been used not just for p&C transactions, but also life transactions. further flexibility is provided through the Bermuda Monetary authority’s broad definition of “fully funded”, a definition developed in close consultation with the industry leaders most likely to utilise these sophisticated structures. It is not necessary for a transaction to be fully funded with cash or other investments, as is the case with cat bonds; the funding may also be provided through the use of reinsurance arrangements, swaps, letters of credit or other similar instruments. This means that spIs can be used for transformations and a multitude of other transaction structures.

In 2010, eight companies were registered as spIs in Bermuda and another twenty-three have been registered up to the end of 2011, making them the single most popular class of new insurers in Bermuda and clearly demonstrating their appeal in the island’s increasingly sophisticated insurance market. all of the recent fully-funded sidecar transactions in Bermuda, including lancashire’s innovative accordion re transaction, have utilised the spI structure, and the use of the vehicles for collateralised retrocessional transactions has also been popular. alterra’s recent new point re collateralised retrocessional vehicle is a particular demonstration of the spI’s use even where multiple cedants are involved. provided that each transaction is separately structured, a single spI can be used for multiple deals, further increasing their potential for efficiency.

BERMUDA’S ilS RESURGEnCE

MICHAEL FRITHCONYERS DILL & PEARMAN

CHARLES COLLISCONYERS DILL & PEARMAN

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of particular note, a number of cat bonds have been registered as spIs in Bermuda, including Chartis’s lodestone re, state farm’s Merna re and embarcadero re for the California earthquake authority, to name but a few. Together, these represent well over $2 billion in new cat bond issuances. as 2012 progresses, and the efficiencies of the spI structure become even more widely known, we expect that new Bermuda cat bond issuances, using an spI as the base reinsurance vehicle, will substantially exceed the $2 billion-plus total seen for 2011.

ILS FUNDSConcurrently with the development of the Ils products themselves, Bermuda has, quite naturally, seen increasing interest in new start-ups of funds investing in Ils instruments. large institutional and pension fund investors are increasingly attracted to the prospect of returns not correlated with the equity markets. Ils funds are also being formed covering areas beyond the typical natural catastrophe risk type to life insurance and man-made events such as terrorism.

Ils funds may invest in a variety of insurance related instruments, but typically there is a mechanism to “transform” the reinsurance instruments into securities which can be invested in by the fund without exposing the fund to the need to itself license as an insurer under applicable insurance regulations. This is typically through the use of a

third party or dedicated transformer entity, with the Bermuda spI structure described above being one of the most popular new tools available to the sector.

new Ils products and funds are being developed at a healthy rate, and the sophisticated Bermuda infrastructure is keeping in step with that development. service providers are ramping

up their operations to accommodate this surge in interest, with organisations such as the horseshoe group and IsIs fund services joining forces in Q4 2011 to create a new specialist Bermuda Ils fund administrator.

The Bermuda stock exchange has also assisted in the renewed interest in Bermuda as an Ils market. a number of the recent cat bonds have been listed on the Bermuda stock exchange, and in order to encourage additional listings, the Bermuda stock exchange has recently lowered its listing fees.

with these developments, and the continued innovation of the Bermuda insurance and investment fund market, we expect that the island will continue to lead the Ils industry into 2012. •

in 2010, eight companies were registered as SPis in Bermuda and another twenty-three have been registered up to the end of 2011, making them the single most popular class of new insurers in Bermuda and clearly demonstrating their appeal in the island’s increasingly sophisticated insurance market. All of the recent fully-funded sidecar transactions in Bermuda, including Lancashire’s innovative Accordion Re transaction, have utilised the SPI structure, and the use of the vehicles for collateralised retrocessional transactions has also been popular.

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ExPERiEnCE THE wORlD’S lARGEST CORPORATE MUlTi-SPORT FESTivAl THE BERMUDA CORPORATE gAMESOCTOBER 25-28, 2012

A precious jewel set in the north Atlantic Ocean, a pristine environment less than two hours from the East Coast of the USA; Bermuda is far more than its beautiful beaches and extraordinary diving, with over four hundred years of history and incredible architecture.

It’s the perfect mix of business, sport and tourism! It is also the first host country to stage the largest multi-sport festival called the Bermuda Corporate games.

why Bermuda? It’s a major international business centre; home to some of the world’s best known and most respected insurance and multinational companies.

Bermuda’s financial services sector is composed of several allied but quite distinct activities, including commercial insurance and reinsurance, captive insurance, corporate and personal trusts, fund administration, international registers of aircraft and shipping and Islamic finance.

The most visible and important activity is commercial insurance and reinsurance. Bermuda’s first insurance company was formed in 1903 to provide local on-island coverage. The first international insurer arrived on the island in 1947. since the mid-1980s, the ongoing formation of insurance companies peaked with waves of new capital in 1993 (following hurricane andrew), 2001 (after the tragic events of september 2001) and

2005 (after hurricanes katrina, rita and wilma). Bermuda has emerged as a global insurance centre whose companies boast total assets of approximately $500 billion and shareholders’ equity of some $120 billion.

Bermuda’s businesses prosper because the Island offers a stable operating environment, an educated workforce, regulation of the highest international standard, a pro-business mentality and tax neutrality. all supported by a top quality support services infrastructure offering legal, accounting and banking facilities. Bermuda is open for business! Business that will complement and support the other key pillar of our economy: tourism.

so what are the Bermuda Corporate games? from small beginnings in san francisco 25 years ago, the Corporate games has become a global phenomenon, a mass participation, multi-sports festival that has brought together 20,000 companies from 25 countries around the world and over 1 million participants; and now, for the first time in the atlantic region, Bermuda will host its inaugural games in october 2012.

The Bermuda Corporate games are a combination of business, sport and tourism, with teams pitting themselves against others in a spirit of friendly competition providing the opportunity for companies to invest in their employees, to build company morale, confidence and loyalty, while promoting their corporate brand.

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Competition will be inclusive and accessible to all, with visiting companies competing against international and local companies, government agencies, sports clubs and other community organizations.

a recent Mckinsey survey on the ‘impact of the economic downturn on businesses’ noted the critical importance of non-financial motivators. with staff morale at an all time low, and when businesses need staff to contribute above and beyond normal expectations, participation in events such as the Corporate games will result in greater staff retention, through team building, reinforcing employee confidence and enhanced loyalty, resulting in a positive image of their company.

The Corporate games have been brought to Bermuda by The whitfield group ltd., the Island’s leading marketing and events agency for the past 25 years, who are the sole licensee for the atlantic region, which includes Bermuda, the east coast of the us and Canada, the Caribbean and Toronto.

suzie pewter, president of The whitfield group, commented:

“we are delighted to be able to bring the Corporate games to Bermuda and to be able to partner with the Bermuda Department of Tourism. This is an outstanding opportunity for corporations to invest in their employees, promoting team building, confidence and loyalty, while enhancing their corporate brand and networking with other local and visiting participating organizations”.

The Minister of Business Development and Tourism, the hon. wayne l. furbert, Jp, Mp, whose Ministry is providing critical infrastructure support and the host Country sponsorship commented: “The Bermuda Corporate games are being billed as the quintessential event that will attract local and international business participants, inviting them to engage in several days of fun and competitive sporting activities. we are thrilled and

excited about the exposure Bermuda will receive from this event, and as such, I am pleased to endorse and support the 2012 Bermuda Corporate games.”

Minister of Bermuda youth, family and sport, the hon. glenn a. Blakeney, Jp, Mp added:

“This event promises to be one of the largest corporate events to come to the Island, and it is a great opportunity to showcase Bermuda and our fine sports facilities. The Bermuda Corporate games will add to our efforts to be recognized as a world class sporting venue with excellent infrastructure and uniquely welcoming amenities”.

The Bermuda Corporate games are for the everyday athlete or ‘weekend sport warrior’ and are open to all ages with no qualifying standards required. The opportunity to build corporate morale, through friendly competition while networking and developing new client contacts, all wrapped around a four-day multi-sport festival, offers a range of positive outcomes for competing organizations due to the ultimate mix of sport, business and tourism!

so take this opportunity to see Bermuda up close, talk to the companies that are thriving on the island or create new relationships with the visiting corporate teams.

Join us for hand shakes and high fives at the Bermuda Corporate games, october 25-28, 2012.

for more information on this exciting event contact: suzie pewter, president The whitfield group ltd. atlantic licensee for: Bermuda Corporate games t +441 232 9999 f +441 292 6990 e play@bermudacorporategames.com w bermudacorporategames.com •

Sports include:• Badminton• Ball hockey• Basketball 3s• Beach volleyball 4s• Golf• Hockey

• netball• Rugby 7s• Running • Sailing - 420• Soccer 6s• Softball

• Squash• Swimming - long distance• Tennis• Tenpin bowling• Touch• Triathlon

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