Bermuda Monetary Authority Implements Regulatory Change.....................4 eeping Stock with K the Bermuda Stock Exchange.........................6 MarketTalk with KPMG .................................7
SPECIAL REPORT 2010
Validus Group offers a broad range of innovative insurance solutions, with a particular emphasis on short-tail lines of business. Our growing team of specialist underwriters has expertise in a diverse range of product lines. Validus Group includes Talbot Underwriting Ltd, which operates in the Lloyd’s Insurance Market through Syndicate 1183. Results for year ended 31 December, 2009, for Validus Holdings, Ltd, listed on the New York Stock Exchange: • Gross premiums written $1,621.2 million • Net premiums earned $1,449.6 million • Net operating income $533.3 million • Net income $897.4 million www.validusholdings.com
INTRODUCTION In the past four hundred years, Bermuda, once an isolated forest in the Atlantic, has grown from an uninhabited island to a modern society with a thriving international business sector. From the very beginning, Bermuda’s inhabitants found many ways to support themselves and to make a living: shipbuilding, salt-trading, farming, whaling—capitalising on its strategic position between Europe and the emergent United States. Bermuda is the oldest and most populous remaining British overseas territory, settled by England a century before the creation of Great Britain. By the close of the 18th century, Bermuda had become known as an island paradise, sending produce and flowers around the world and welcoming travelers to its beautiful shores. Through the concerted effort of the Government, public and non-profit sector, a mosaic of opportunities and services await businesses looking to expand or start fresh on this unique Island. Large numbers of leading international insurance companies are based in Bermuda, making the territory one of the world’s largest reinsurance centers. Those internationally owned and operated businesses that are physically based in Bermuda—of which there are around four hundred—are represented by the Association of Bermuda International Companies (ABIC). In total, over 1,500 exempted or international companies are currently registered with the Registrar of Companies in Bermuda. A long litany of professional organisations such as international law firms, accounting firms, independent consulting organisations and others result in multi-faceted Bermuda-based professional services, offering objective solutions and high-end technical and strategic support for world-class professionals. Over the last few years the Bermuda Monetary Authority, along with the Ministry of Finance, have made an unprecedented move towards transparency and making sure Bermuda is a highly regulated offshore jurisdiction. As many other leading jurisdictions across the globe aim to achieve the success that the public and private sector have experienced in such a short time span, they are reminded of the infrastructure Bermuda has to offer and her ability to act fast in both sectors. This helped the Island attract 42 new re-insurers in 2009, with an expected increase in 2010. At the start of 2010 the BMA is currently in the final implementation stages of creating a framework which is equivalent to Solvency II. Their aim is to finish this new regulatory framework by the end of 2010 making it one of the first jurisdictions to do so. Bermuda has gone to great length to shed the image of a “tax haven.” In 2009 the country took a major step by being placed on the OECD White List after signing 18 Tax Information Exchange Agreements. The hard work is already starting to pay off with new TIEA’s being signed with Japan and several other leading G20 Nations. This is welcomed by the local and international business community within Bermuda, as everyone seems to agree with the BMA and Ministry of Finance that a more open, transparent market would only strengthen Bermuda’s business ties across the World. These actions have allowed Bermuda to stay at the top with a GDP of $5.85 billion (2007), or $91,477 per-capita, giving the country the highest GDP per capita in the World, and one of the highest standards of living Worldwide. Tourism is Bermuda’s second largest industry, with the island attracting over one-half million visitors annually. Tourists arrive either by cruise ship or by air. One of the Island’s main attractions are the unusual pink sand beaches and clear, cerulean blue ocean waters, which are popular with tourists and many of Bermuda’s hotels are located along the south shore of the island. In addition to its beaches, visitors can expect to find dining opportunities of the highest order, internationally ranked golf courses, boutique hotels and resorts, and innumerable sightseeing attractions. Looking ahead, in order for growth to continue as the norm, it must be recognised that the prosperity and vast array of opportunities now available to Bermudians is not the result of blind good fortune or random chance—it is the result of 400 years of thrift, hard work and perseverance against unimaginable odds. The ingenuity and resilience that have become the hallmarks of Bermuda business throughout its history and the values that they represent is the true story of the island. Today, as Bermuda has become a key nexus point of the world’s financial and insurance industries, providing global leadership in the areas of reinsurance, insurance, trust administration, banking and e-commerce, Bermudians look toward an even brighter tomorrow. n
email@example.com T: +44 (0)20 7125 0579 F: +44 (0)20 7183 8393 Editor: Robert Rimsky Sales: Kuljit Kaler Regional Director: Joseph Bove Design: The Arland Group Suite 404, 324 Regent Street, London, W1B 3HH Registered in England & Wales Registration No. 06900033
4 | Business in Bermuda
Implementing Regulatory Change International responsiveness with a local outlook. The Bermuda Monetary Authority is responsible for the licensing, supervision and regulation of financial institutions in Bermuda, including those conducting deposit-taking, insurance, investment and trust business on the island. Established up in 1969, the independent regulator’s role has become increasingly important in today’s international business environment, where the recent financial crisis underscored the importance of effective regulation to global financial stability. As a risk-based financial services regulator, the Authority applies regulations that are practical and effective for the Bermuda market, and consistent with international standards. Jeremy Cox, CEO of the Authority said, “The Authority has an on going programme of enhancements to its regulatory regime that supports continued innovation in the marketplace, while also ensuring that the high standards for which Bermuda is known for are maintained. “ “Our overall goal is to be internationally recognised as a leading risk-based financial regulator. For the past three years we’ve published our Business Plan which outlines the key projects planned across all segments of the market to assist us in reaching that goal. These changes are principally focused on the insurance and banking sectors with an emphasis on capital adequacy. We successfully implemented Basel II as of January 1, 2009 for the banking sector, and we’ve made considerable progress with our preparations for regulatory equivalence of our insurance framework with other major jurisdictions. Our equivalency work has been particularly focused on obtaining this status under Europe’s Solvency II Directive.” The Authority has also successfully shifted the focus of its work in relation to Bermuda’s enhanced regulatory framework and new standards for anti-money laundering/anti-terrorism financing (AML/ATF) from policy development to supervisory programme implementation. A dedicated in-house Compliance Unit has been established to act on the expanded AML/ATF responsibilities conferred on the Authority under the Proceeds of Crime Regulations (Supervision and Enforcement) Act 2008, one of a suite of legislation that strengthens Bermuda AML/ATF regime. During 2010, the Authority intends to further enhance the supervisory programmes that support monitoring of firms’ compliance with the regime; and to conduct enforcement action, as necessary. Also in 2010 a key objective for the Authority will be preparing for equivalence under Solvency II. Mr. Cox noted, “Last year we published the Solvency II Roadmap which details our work plan towards equivalence. We’ve made considerable progress in our work plan and have reached some significant milestones. For instance,
“The Authority has an on going programme of enhancements to its regulatory regime that supports continued innovation in the marketplace, while also ensuring that the high standards for which Bermuda is known for are maintained” Jeremy Cox, CEO of Bermuda Monetary Authority we’ve already introduced the Bermuda Solvency Capital Requirement, our enhanced risk-based capital model and a framework for reviewing and approving insurers’ internal models to determine regulatory capital. We’ve also made excellent progress on introducing group-wide supervision for Bermuda’s largest commercial insurers and have recently published a consultation paper on our proposals for industry comment.” The Authority also recognises it will require significant resources to support implementation of its enhanced supervisory programmes effectively. It therefore will be focusing on building on its existing senior-level expertise and skills, particularly in its supervisory and policy teams during this year. These resources will be dedicated to implementing group supervision. The Authority is also engaged in the international debates about regulatory reform which have gained momentum as a result of the global financial crisis. For many years the Authority has monitored, and been involved in, the work of international standard setters, such as the International Association of Insurance Supervisors for the insurance sector. Through this participation the Authority seeks to contribute to changes to regulatory standards as they are being developed. The goal also is to ensure that Bermuda’s regulatory framework remains highly compliant with international standards, while at the same time being practical and effective for the Bermuda market. Mr. Cox added, “Although we have adopted an aggressive regulatory agenda, we’ve successfully maintained a good balance between making enhancements to Bermuda’s framework in line with international standards, and fostering a dynamic environment for business development in Bermuda, which we will continue to strive for moving forward.” n
Business in Bermuda | 5
On Point A conservative approach pays off in uncertain times. At the Validus Group, the bottom line of clients is the integral ingredient to every equation calculated. This approach has proven to be one of the keys to success for Validus, according to Chairman and CEO Ed Noonan. “This means we not only apply cutting-edge analytics to our decision-making processes, but we also share the insight gleaned with our clients— we do not just tell our clients that we will get back to them promptly with answers, we do. And if supporting our clients means acquiring additional capabilities, that is precisely what we deliver.” Leveraging their flexibility and creativity, Validus develops the insurance and reinsurance solutions their clients need, when they need them. This has helped Validus earn the reputation of continually underwriting a balanced and wellspread portfolio of primarily short-tail insurance and reinsurance business, giving superior risk and return characteristics. What kind of year was 2009 for Validus Group? How has the economic downturn impacted your company? 2009 was an outstanding year for Validus. We repositioned the company strategically into a true global leader in property catastrophe reinsurance, earned $897 million, and grew book value by 28.2%. We were largely unaffected by the financial crisis as our conservative investment policy allowed us to avoid the asset write downs suffered by the industry. What are your plans for 2010? We will continue to grow our Lloyd’s syndicate, Talbot Underwriting, while maximizing returns in our Bermuda reinsurance business, Validus. Our challenge is ‘right-sizing’ our capital to the business opportunities we have. We have announced a $750 million share repurchase to accomplish this. Our biggest growth will come in classes like On-shore Energy Insurance and Direct Aviation Insurance, where we have added market leading teams to capitalise on rising rates. The government has signed many TIEA’s in the last year and the BMA are in the process of enhancing its regulatory framework to comply with international standards. How has this helped your business operations and the group’s global image? Bermuda is a strongly regulated market, and going to further strengthen as we move toward Solvency II. Bermuda’s performance during the global credit crisis was second to none, and we support the ongoing development of the BMA’s regulatory framework. As a Bermuda-committed company, it is important that regulators around the world understand that Bermuda is not a ‘brass plate’ jurisdiction, but rather a sophisticated business environment with cutting edge technical underwriting, disciplined capital management and a strong regulatory regime. What keeps Bermuda an attractive base for major reinsurance and financial companies? Do you expect to see more high level departures in 2010? Bermuda will continue to be a critical center for the global re-
Edward Noonan, Chairman and CEO of Validus Holdings Ltd.
insurance industry, and the most technically disciplined global catastrophe market. Companies may seek other domiciles based on their unique circumstances, but we believe this will have no effect on Bermuda’s strength and vibrancy as a market. Companies that redomicile continue to have major Bermudian operations due to its importance as a business center. What relations do you already have with the U.K.? Validus owns one of the leading syndicates in Lloyd’s, Talbot Underwriting. We enjoy excellent relations with Lloyd’s and the FSA, and believe that the regulatory oversight provided in the UK is an asset to our business and the industry. Whom from the U.K. audience would you like to reach out to and why? Simply put: UK investors. Validus is a global company, with the majority of its business written outside of the US. As such, we believe we offer UK investors the opportunity to invest in one of the leaders of the global short-tail insurance/reinsurance industry at a time of relatively attractive valuations. What personal message would you like to send out to corporate London about the Validus Group and Bermuda? In brief, Validus is an extremely well capitalized specialist in short tail risk, with outstanding risk management and experienced leadership. We are committed to delivering the greatest value possible to our shareholders while growing our business opportunistically in well-priced risk classes. Bermuda is a mature, well-developed business center with an excellent regulatory regime. Its success may have originally been based on relative tax advantage, but it has transformed into an indispensable center of excellence in the global insurance/reinsurance industry. n
6 | Business in Bermuda
Keeping Stock Growth never felt so easy. The Bermuda Stock Exchange (BSX)—founded in 1971, is the leading fully electronic offshore stock exchange in the World. The BSX operates a
market for international securities, issued either by Bermuda incorporated exempted companies or non-Bermuda issuers, as well as a domestic market for Bermuda’s local companies.
With 650 listed securities, including over 360 funds, and a market cap of approximately $200 billion, BSX is a commercially sensible, internationally recognised market. Bermuda is home to a thriving and dynamic offshore financial services industry. For many years, Bermuda has been the leader in creating and implementing the business and regulatory models that have become the standard for other jurisdictions to follow. Bermuda is located within two hours flying time from most US East Coast hubs and a short flight to Canada. Daily air service to the UK makes Bermuda the gateway between Europe and North America. Proximity to the World’s largest capital markets and global business centres has been a key ingredient in Island’s success. Bermuda has carved out a niche in the global financial services industry which is well known and highly regarded. Bermuda’s pragmatic commercial approach has created an operational, technical and regulatory infrastructure focused on clients’ needs which is the result of a collaborative effort between the private and public sectors of the jurisdiction. This model ensures jurisdictional policies remain in line with or ahead of market developments and keeps Bermuda’s regulatory oversight at prudent levels, whilst also maintaining support and appreciation for the entrepreneurial spirit that drives innovation. President and CEO Gregory A. Wojciechowski said, “We have collective experience in how to deal in an international business environment. We’ve had to evolve with the times, with changing onshore regulations, and adopt regulation to suit the needs of the jurisdiction as well as our clients who use the jurisdiction.” This approach has driven the development and success of Bermuda’s reinsurance and global financial services industry. Bermuda has been transformed from a tourist destination in the 1950’s to the enviable position of being one of the most significant insurance and reinsurance centres in the world. With an insurance market compromising nearly 1,400 companies, total assets of $442 billion and gross premiums of $142 billion, Bermuda is regarded as a pioneer and leader of the offshore reinsurance industry and has the third largest market in the world. At the heart of this reinsurance market sits listed insurance companies and insurance linked securities worth $39 billion, the BSX is becoming the exchange centre for the listing of these products. The exchange provides sophisticated and institutional investors with a single location to obtain access to and information on this developing market segment. Bermuda not only stands out as a leader in risk based solvency for the global insurance and reinsurance sectors, but also is
“We take the reputation that we have very seriously and we guard it very carefully as we value our quality clients.” Gregory A. Wojciechowski, President and CEO
an economic success story, with a solid track record of macroeconomic stability at a time when many other countries are experiencing economic problems. Because of this, Bermuda’s indigenous reinsurance industry has developed strongly and now supports the global insurance industry, particularly in the US. Bermuda presently provides approximately 40% of US and EU broker placed catastrophe covers and is now the most important offshore supplier of insurance, reinsurance, and payer of property and casualty losses to the US. For those suspicious of offshore jurisdictions, they should be comforted by the Bermuda Monetary Authority strengthened regulations governing money laundering. Regulating both the insurance and capital markets in Bermuda, is the Bermuda Monetary Authority, under whose auspices the Insurance Amendment Act 2008 came into effect in October 2009. An independent Financial Intelligence Agency has also been established to monitor suspicious transactions. After signing eighteen Tax Information Exchange Agreements, Bermuda has secured its place on the OECD’s ‘white list.’ With high profile recognition that the country is committed to tax transparency and fully implementing established international standards, it has also earned a Vice-Chair position on the steering group of the OECD’s new global forum. Mr. Wojciechowski states: “Bermuda has never shirked its regulatory responsibility and has always, always opened itself for outside inspection and has enthusiastically embraced international standards of regulation. We take the reputation that we have very seriously and we guard it very carefully as we value our quality clients.” Stable economic growth and high per capita incomes, combined with easy access to the North American and European markets has proved a catalyst for attracting not just business, but intellectual capital to the island. Future investors will find World class service providers in the realm of law firms, insurance managers, and accounting firms to ensure top of the line assistance across all commercial interests, thereby providing a quiet confidence behind Mr. Wojciechowski’s stance that: “As in previous years, with added regulation of the BMA and continued professional development of Bermuda, we expect to continue our positive growth.” n
Business in Bermuda | 7
MarketTalk What new regulation means for 2010 and beyond. What has been the impact of The Global Recession on the Bermuda Market? Richard: Firstly, let me say there were no business failures in the Bermuda insurance sector. The Bermuda market weathered the economic storm well. Balance sheets were adversely impacted in 2008 through declining asset values in investment portfolios, however these have largely recovered in 2009. This, combined with benign insured loss activity has meant results for 2009 have been strong pretty much across the board. The industry generally has performed well through the recession which reflects on the quality of risk management both on the asset and liability sides of the balance sheet. Although some have faired better than others and I think key lessons learned have been that having a deep understanding of risk on the asset side of the balance sheet (investment portfolio) is equally as important as managing the risks on the liability side (insurance reserves). We will continue to see greater focus on risk and capital management. Having recouped much of this capital lost in 2008 during 2009, the challenge for 2010 is to find sufficient attractively priced business in a declining rate environment and to generate sufficient investment returns without uprisking portfolios. Many companies are choosing to buy back shares, at prices below book value, as a way of managing capital. This may be helpful in the short-term but with Solvency II on the horizon and uncertainty as to the levels of capital required to satisfy the regulators and rating agencies there will be limits as to the use of buy-back schemes to manage returns on equity. In Terms of Regulation, what effect has Solvency II had on the Market in Bermuda? Richard: Bermuda has a long standing commitment to international regulatory cooperation. All constituents of the market recognise the need for Bermuda to
maintain its reputation as a well regulated financial services jurisdiction and embrace the need for internationally recognised and consistent regulation. Bermuda is proactive in working with OECD, International Association of Insurance Supervisors (IAIS) and IMF to maintain and develop regulation and transparency consistent with international standards. The Bermuda Monetary Authority (BMA) is very much engaged in the development of international insurance regulation and has seats on key committees of the IAIS, including membership of the executive committee. The Bermuda government also has a vice chair position of the OECD Global Forum steering group. From an insurance perspective it is important to recognise firstly that Bermuda is a wholesale market, a business to business market and not a retail insurance market. It is also a very diverse market ranging from captive insurance companies to large international insurance and reinsurance groups. These groups are all highly rated by the major rating agencies. The regulatory framework in Bermuda has recognised the diverse and wholesale nature of the market, the differing regulatory risks these present and the variant policyholder protection needs to a retail market. The BMA has a Solvency II equivalence program underway for the insurance sector which is both designed to achieve equivalence and recognise the unique aspects of the Bermuda market. This means that the commercial insurance sector will be regulated on a Solvency II equivalent basis and the captive sector which presents entirely different regulatory risk and needs for policyholder protection will continue to be regulated on its current basis.
CONTINUED ON PAGE 8
KPMG Richard Lightowler, Head of Insurance, KPMG Bermuda Mike Morrison, Managing Director, KPMG Advisory Ltd, Bermuda Rees Aronson, Head of Insurance Audit UK, KPMG London
Mutually Beneficial Leading the way for shipowners entering U.S. waters. Marilyn Feldman, President Shoreline Mutual was incorporated in response to the Oil Pollution Act 1990: legislation introduced in the wake of the Exxon Valdez disaster in 1989. A major reason for success, according to Marilyn Feldman, has been this simple fact, “We in Bermuda can provide the responsiveness and responsibility that our ship-owners expect.” Under this Act every ship entering United States waters has to provide evidence of its ability to pay for the consequences of oil pollution. The US Coast Guard issues a Certificate of Financial Responsibility which proves that the polluter has both the means and ability to pay for the consequences of such a spill up to the limits specified under OPA ’90. “The fundamental message that our board mandates is that we give the best service to our clients at the best rates, which is what we do.” Shoreline supplies guarantees to the US Coast Guard to enable a COFR to be issued to its member. The Company’s sole activity is to act as a Guarantor on behalf of its Members, and is authorized by the US Coast Guard for the purpose of issuing guarantees up to the limits required by OPA ’90 legislation. n Shoreline Insurance Managers LTD. 44 Church Street PO Box HM 2064 Hamilton HM HX Bermuda Telephone: (441)296-2324 Fax (441)295-8504
8 | Business in Bermuda
CONTINUED FROM PAGE 8: MarketTalk So what does that mean for players in the market? Richard: For the most part companies in the commercial sector have established Solvency II equivalence programs internally. These largely build upon existent capital models and risk management programs and for most will not require radical change in the way they conduct business. Further enhancement and validation of models, improved risk management metrics, enhanced data quality, more efficient governance frameworks and transparent disclosure are areas in which we are helping companies on their path to Solvency II compliance. I think management teams generally see the business benefits of change if it is implemented in a pragmatic way. The greatest challenges for the commercial sector are the uncertainties associated with the levels of capital requirements and how and when equivalence for Bermuda will be assessed and obtained. Certainly, indicators from the regulators environment in the EU through QIS 5 are that capital requirements will go up further. This is quite rightly receiving adverse reaction from the industry; an industry that has successfully dealt with the three most significant economic losses in recent times (World Trade Centre, Hurricane Katrina, financial crisis). Companies will focus on building their own capital models to manage this capital pressure; however I think that there is general concern that regulatory reaction to the banking crisis will spill over into the property and casualty insurance industry, which today from an economic perspective is at worst adequately capitalised and probably over-capitalised. Bermuda companies continue to monitor and lobby internationally. The uncertainty as to how much capital to maintain and where to keep it is a challenge most companies have on their agenda, one which is causing them to consider legal and operating structures. I personally believe the wisest action to take at this point in time is one which is often most difficult to make – sit tight and wait for more clarity. Do you think that Bermuda having the same regulatory framework as the EU will help drive more business to Bermuda from the EU and UK? Rees: An interesting question. If you look at the history of the Bermuda and UK markets you will see that movements between the two markets have been for commercial reasons i.e. to gain access to those local markets. The insurance risks written in Bermuda are often not seen in the London market and vice-versa. Richard: That’s absolutely right. The London-Bermuda relationship is twenty-plus years old. A significant amount of Lloyds capacity is provided by Bermuda companies and over the past 10 years or so there are an increasing number of Bermuda companies with operations in Europe, US and the far east. Equally, many UK and EU-based companies have a Bermuda platform. The drivers are commercial, not regulatory; access to different markets, diversification of risk and product. The geographic proximity of Bermuda to the US, the largest purchaser of insurance, makes it an attractive place to operate from. With huge intellectual capital and a truly developed infrastructure including brokers, lawyers, accountants and telecommunications, Bermuda is a real marketplace. It has proven to be a location where a successful business can be built in a short period of time either as a start-up or as an extension of an existing franchise. Indeed it is the speed-to market that has been Bermuda’s key regulatory
advantage over the past 10 years. Mike: I agree. Equivalency under Solvency II should create consistency of regulation whereby companies make decisions, not based on where they need to be from a regulatory prospective but where they want to be for a business and accessing markets perspective. Given the intellectual capital, technical expertise and key role Bermuda market plays in global risk management I think that Bermuda will continue to be a location that global companies will want to conduct business in. What major trends do you foresee for 2010? Richard: I’ve talked already about the need to effectively manage capital both from an economic and regulatory perspective. Investment markets will continue to be challenging with returns difficult to come by without increasing exposure to risk. Active portfolio management will be important going forward. Premium rates for most lines of business are falling so, for those that are true to their word of writing for bottom line contribution rather than top line growth we will see premium volumes drop. Although as a market that comprises many specialty insurers the Bermuda companies will be less impacted than those in traditional markets. Those companies with casualty (Directors & Officers, Errors & Omissions, and Financial Institution) and Political Risk exposure will no doubt be concerned about the possibility of more claims emerging from the financial crisis and the potential for deterioration in reserves. A recessionary environment along by the potential for inflation will cause companies to focus on claims management. There is always speculation of M&A activity. We have seen some activity in Bermuda market over the past twelve months and I think there will be continued interest in order to reach critical mass (the $3 billion capital threshold is seen by many as key). The practical challenges are finding complimentary business rather than merely doubling up and then consummating a transaction at a time when many companies are trading below book value – it is a bold board that will recommend the sale of a company below book value. Mike: I agree that growth is going to be difficult to achieve, particularly in traditional markets and the larger developed economies which will continue to suffer from the recession. Growth therefore is more likely to come from non-traditional markets. There is certainly an increasing interest in Latin American, particularly Brazil, which like many developing economics was significantly less impacted by the recession. It is becoming easier to access the Brazil market and I think there are opportunities in the near term. Similarly many companies continue to look east, particularly using Singapore as a gateway to both China and India, although we are still some time away before these markets really open up for the reinsurance industry. There still needs to be more development of institutional infrastructure and a relaxation of investment restrictions to enable significant growth opportunities. The conundrum is timing, long-standing relationships are important in the industry nowhere more so than China, but opportunities are not significant today. n
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10 | Business in Bermuda
Going Green New projects and old school ingenuity lead to greener pastures. Bermuda’s willingness to recognise and respond to change continues to be its strength. Steady change has seen Bermuda’s economic driver move from tourism to international business and slowly back to tourism. As a result, the construction industry has always needed to refocus. The recession in the late 1980s and early part of the 90s had a severe impact on the industry, but it wasn’t all bad news. When the recession ended, Bermuda experienced a rapid increase in the number of international businesses that made the Island home. Over time, this cranked up the demand for office space and accommodation. Now, twenty years on, the Bermudian construction industry is transforming itself once again: into a leading jurisdiction for green development and Sport Tourism. From a new biofilter company that seeks to cut down on contamination in Bermuda’s waste disposal industry, to innovative building companies like BCM McAlpine and Bermuda Engineering: many are now looking to take advantage of Bermuda’s easy access to sun, wind, and surf for energy dependence. It is sufficient to say that the conditions are right for a green building boom in Bermuda. LEED standards are currently available or under development for new and existing residential and commercial developments. Based on scientific standards, LEED focuses on state-of-the-art strategies for sustainable site development, water savings, energy efficiency, materials selection and indoor environmental quality. Being that Bermudians are fully dependent upon rain for drinking water, water efficiency is taking the next step to include innovative wastewater technologies for recyclable usage. This dynamic is expected to combine with water use reduction so as to fulfill the desire for on-site renewable energy and green power. Alan Burland, President of BCM McAlpine and Bermuda Engineering stated, “Bermuda has some great attributes that will allow us to use wind, solar, ocean thermal and biomass energies using tried and tested methodologies. We intend to show the world how it’s done.” In fact, Renewable Energy Systems (RES), BCM McAlpine, and Bermuda Engineering are currently proposing several eco projects, including the Castle Harbour Solar Project, a 56 acre solar farm near the Bermuda International Airport. The construction industry has benefited from the Island’s booming economy over the last decade, creating hundreds of jobs as office buildings broke ground all over Hamilton to meet the needs of new international companies, most of whom were insurers. As the number of new companies coming in slows, added to the sluggish recovery in the tourism sector, Mr. Burland is under no illusions as to how challenging the future will be, but he sees opportunities. “The construction sector and the country itself have been very dependent on international business over the last twenty years.” While that sector has done quite well, tourism has lagged far behind, finding it increasingly difficult to attract new customers even from the US, Bermuda’s primary market for tourists due to its location. With new green technologies coming out every day, and the entrepreneurial spirit of Bermudians, the term “going green” isn’t just a lifestyle choice, it’s a moneymaker. As Alan Burland said, “It’s time to focus on harnessing renewable resources to sustain our energy needs without being so exposed to the price of imported oil.” One plan that has Mr. Burland excited is the CUT. Peter Wilson, CEO of the CUT Sports Training Complex—feels he has come up with an
Travis and Alan Burland, Bermuda Engineering Co. Ltd. all weather activity tourism solution to fill the niche. His aim is to develop a LEED specified, Sports Training Complex to meet local and international demand. The business plan addresses the needs of the area and the community, focused locally on youth development through sport, and focused internationally on revitalizing tourism to Bermuda. Already expressing interest in the project is Chelsea FC U16 team and one of their coaches recently visited Bermuda to advise on training pitches and to review the possibilities of bringing teams to the Island for training. The complex will include a gymnasium with a boxing ring, a basketball court, badminton and two squash courts, all with public viewing areas. A FIFA football training field with 2,700 seats—two training fields doubling as an event area with stage—two covered tennis courts, covered diving and a 50m swimming pool and a 240 seat restaurant plus entertainment area. Further included will be a 94 room hotel with multiple executive suites, a sports physiotherapy centre, a film/ media viewing auditorium, a recording studio, bowling alley, cinema and supermarket. This sort of class luxury will inevitably compliment the planned public costal boardwalk, electric cars, 100 bed student/ player accommodations, Maritime and Theatre Training Schools and all further elements of mouth-watering action focused activities lying in wait for the typical go-getting tourist Mr. Wilson plans to attract. Therefore, according to the logic of a reasoned, experienced man, Mr. Wilson sees the project as “A viable, income generating activity project which benefits Dockyard, the Community, Employment, Youth Development, Sports and is a major plank in the future of Bermuda’s Tourism industry. Needless to say, we’re excited.” Like many countries worldwide, green building has definitely struck Bermuda. Where others talk of change, Bermuda’s strength is its people and they just do it, and they do it well. The country’s prime positioning coupled with support from its positive and proactive Government allows innovative companies to take advantage of countless natural resources that are in ample supply. Many business relationships with green start up companies act like a franchise, allowing for a local Bermudian to be the sole distributor, installer, and ambassador for the brand within Bermuda. As the construction industry continues to diversify and innovate, there are committed leaders like BCM McAlpine and Bermuda Engineering that will show a whole new generation of companies how to adapt and change with the times. These local projects will not only place construction professionals back in the industry, but also teach them new methods and technologies allowing them to impact the future, and the overall energy landscape of Bermuda. n
GENERAL CONTRACTORS AND CONSTRUCTION MANAGERS
BCM McAlpine, Bermuda’s longest-established and most highly respected construction firm, grew out of a family-owned business established in 1926 on what was then a sleepy colonial island. After World War II Bermuda entered a boom phase and, with a new airport and new fame as an attractive tourist destination, particularly for travelers from the US, BCM grew along with Bermuda. Among the company’s major projects was the construction of the landmark Southampton Princess hotel, completed in 1972. In the mid 90s, Sir Robert McAlpine Ltd, a well respected UK construction firm, with over 130 years experience, joined the local team. McAlpine is one of the UK’s leading building and civil engineering contractors, with a vast portfolio of projects that include Arsenal’s Emirates Stadium, London’s Dorchester Hotel, North Sea oil platforms, nuclear power stations, multiple office developments and currently London’s new Olympic Stadium for 2012. BCM McAlpine has completed a number of ambitious projects on the island, including the refurbishment of the Sonesta Beach Hotel in 1995, the refurbishment of the Civil Air Terminal in 1996-7, the Waterfront Development in 1999 and 2005, Cambridge Beaches Resort and Spa 1998 and 2001, the refurbishment of The Fairmont
BCM McAlpine Corner St. John’s & Pitt Bay Roads, Pembroke HM 07, Bermuda
Hamilton Princess Hotel 2001-2, Crow Lane House and Windward Place for RenaissanceRe 2004 and 2008. As Bermuda’s leading contractor, BCM McAlpine offers a winning combination of BCM’s in-depth local knowledge and proven expertise combined with McAlpine’s scope and experience. One of the true strengths of the company is the fact that we can draw upon the expertise from McAlpine to ensure we have the skills and experience necessary for any project. The training that is available to the staff ensures that there will always be a wealth of highly skilled and qualified employees on hand as well. Few companies can match BCM McAlpine in its commitment to staff excellence. Bermuda must be part of the global economy but must be extraordinarily flexible and must not be too reliant on just one pillar of the economy. Tourism and international business must continue to reinvent themselves, amenities must be improved, and Bermuda should continue with preliminary steps to be a model for a green, ecofriendly jurisdiction. Whatever Bermuda’s future, BCM McAlpine is certain to be a productive part of it. As Bermuda enters its fifth century of commerce, the company will remain flexible in our approach and we, like Bermuda, are here for the long haul.
Telephone: (441) 292-2288 Fax: (441) 292-3744 firstname.lastname@example.org
12 | Business in Bermuda
Leaders in Corporate Citizenship
Bacardi expands its portfolio of premium spirits while encouraging responsibility. Bacardi Limited is the largest privately held spirits company in the world. Bacardi is a family owned business, still owned by seven generations of descendents of the founder, Don Facundo Bacardí Massó. Focused upon a portfolio of premium products, Bacardi is proud to employ more than 6,000 employees and produces its fine brands at 27 production facilities around the world. These facilities produce a variety of internationally renowned spirits and wines, including some of the world’s favourites. In all, Bacardi produces more than 200 brands and labels, and as a testament to their quality, they’re looking forward to celebrating their 150th anniversary in 2012. How has the business changed over these years? For almost 130 years, we were a single brand company – focused on Bacardi rum alone. In the past two decades, the company has grown tremendously – tripling in size through strategic acquisitions: purchasing Martini vermouth, Dewar’s Scotch whiskey, Bombay Sapphire gin, Grey Goose vodka, Eristoff vodka, Cazadores tequila and others. We continue to look to acquire the right brands to fit around our portfolio. Most people don’t know that Bacardi owns the extensive list of brands you mentioned. Can you tell us about the core brands? Our portfolio is focused on premium and super premium brands. All our core brands are leaders in their respective categories and icons in the spirits world. Grey Goose vodka, for instance, is the top selling super premium vodka in the world. Its unparalleled taste and superb quality have made it the must call brand in trend setting bars and restaurants around the world – its produced in Cognac, France, under the careful eye of a Maitre de Chai. Martini Vermouth is the top selling vermouth in the world and a European favourite. Dewar’s Scotch, as you may know, is the top selling blended Scotch in the United States and one of the top selling in the world. Bombay Sapphire is the top valued and fastest growing premium gin in the world. Eristoff vodka is the favourite vodka in France, Belgium, Chile and Austria. The brand has strong imagery rooted in its Georgian heritage as the vodka from the land of the wolf. Cazadores tequila is the top selling premium tequila in the world and a favourite among authentic tequila connoisseurs. Why are you based in Bermuda? Bermuda has been our chosen, adopted home for 40 years. We settled on Bermuda because of its strategic location-close enough to the US where the business was already established and closely linked with the UK and Europe where we were working to make inroads in sales and distribution.
We settled on Bermuda because of its strategic location—close enough to the US where the business was already established and closely linked with the UK and Europe where we were working to make inroads in sales and distribution. Séamus McBride, President and CEO of Bacardi Ltd. As a global company, what is your corporate responsibility commitment? As the largest privately held spirits company in the world, we know our business impacts many people’s lives, including our customers, suppliers, employees and those who live in the communities where we operate, so we have an absolute commitment to corporate responsibility. With global concerns about the use and misuse of alcohol, climate change, natural resources, working conditions and financial soundness, it is only natural for Bacardi Limited to take concrete action across all these fields. Upon what kind of corporate social responsibility programs does Bacardi maintain a focus? We have identified five key areas where we focus our corporate responsibility efforts: Marketplace; Environment, Health and Safety; Responsible Sourcing; People; and Philanthropy. Our most highprofile and award winning campaign to date has been: Champions Drink Responsibly. It encourages drivers to know the options available to avoid drinking and driving, and encourages the use of public transportation, taking a taxi, designating a driver or drinking nonalcoholic cocktails if one must drive. The program has touched millions of lives already via its sobering message of taking accountability for your actions to ensure the safety of others. n
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