Bermuda's Path of Steady Growth and Cooperation
When Bermuda was first discovered in the early 1500s, mariners called it the ‘Isle of Devils.’ This was due to the treacherous reefs surrounding the island and the piercing shriek of our endemic bird, the Cahow.
One hundred years later, Bermuda’s first settlers were forced ashore, following the wreck of their Virginia-bound ship, the Sea Venture, in 1609, and instead of the feared devils, they discovered a bountiful paradise. Indeed, the shipwrecked crew built two new ships, the Deliverance and Patience, provisioned them with food and sailed on to Virginia, where they found the settlement at Jamestown near starvation. They promptly returned to the island to stock up on more food, saving the fledgling American colony from collapse.
Now, 400 years later, there remain misconceptions about Bermuda and the island’s role in the global financial arena. The island is not actually in the Caribbean, being a thousand miles north and approximately 650 miles due east of the closest point of land in North Carolina. Bermuda has been a self-governing British overseas territory since 1620, with a stable Westminster-style parliamentary democracy. The legal system dates back to 1616 and the island uses English common law with recourse to the UK Privy Council, ensuring the highest levels of legal protection. Bermuda has always been a safe and secure destination from a political, economic and personal perspective.
Bermuda is a well-respected international financial centre, having been a leader in insurance and reinsurance for more than 70 years. The island’s institutions proactively ensure that policies and the legislative framework remain relevant and fit for purpose. It is recognised as a global leader in the fight against financial crime, money laundering and financing terrorism and proliferation by the Caribbean Financial Action Task Force’s (CFATF) Mutual Evaluation Report (MER). The report was subject to a stringent review prior to approval by the global standards setting body, the Financial Action Task Force (FATF).
Of the approximately 100 MERs published by the FATF up to January 31, 2020, Bermuda ranks first overall against the technical compliance requirements, and is one of only two jurisdictions (the other being the UK) with an assessed high level of effectiveness in relation to its risk assessment and domestic coordination mechanisms.
With Bermuda’s long history as a world-leading financial centre for insurance and reinsurance, investment funds, asset managers, family offices, trusts and other private client structures, the island is now diversifying and driving the development of emerging technology sectors, including fintech and insurtech.
With a wealth of highly qualified professionals, Bermuda is also home to a pragmatic and progressive financial-services regulator, the Bermuda Monetary Authority (BMA). Over the past 50 years, the BMA has established a robust regulatory regime to provide the protection and clarity required to fulfil the highest international standards.
In addition, BSX is a fully electronic, vertically integrated international securities market headquartered in Bermuda and set up in 1971. BSX specializes in the listing and trading of capital market instruments such as equities, debt issues, funds, hedge funds, derivative warrants and insurance linked securities. Bermuda is recognised as a global compliance and transparency leader and has 41 bilateral Tax Information Exchange Agreements (TIEAs) and more than 125 multilateral treaty partners. The island has implemented the U.S. FATCA and exchanges OECD Common Reporting Standard (CRS) and OECD Country-by-Country (CBC) information. Bermuda is also a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS).
Bermuda’s advantageous geographic location combines with its physical, financial and regulatory landscape to create an environment of unparalleled access and convenience. Situated between North America and Europe, the island’s favourable Atlantic Standard Time (AST) zone makes it an ideal location to serve markets on both sides of the Atlantic and beyond. English is the primary and official language and the Bermuda dollar is on par with the U.S. dollar.
Bermuda is at the forefront of providing innovative solutions for increasingly complex risks. The Bermuda market enjoys full equivalency with the EU Solvency II regime, which allows its commercial re/insurance companies to be on equal footing with EU markets, while providing EU businesses access to Bermuda’s capacity. It is also one of only three jurisdictions to be granted Reciprocal Status by the National Association of Insurance Commissioners (NAIC) in the U.S.
Through trade and investment, and the island’s essential role in the global risk-transfer industry, the Bermuda market has a proud track record of helping people and communities get up and running after natural and man-made disasters. As the most significant property and casualty (P&C) market in the world, since 1997 Bermuda insurers and reinsurers have paid out over a half a trillion dollars to policyholders and cedants in the US, EU and UK. Bermuda also provides more than 35% of capacity for Lloyds of London. Having formed the first modern captive in 1962, the island remains the world’s leading captive domicile and is home to a broad range of industries utilising captives as a key risk management tool.
BSX is the global leader in the listing of Insurance Linked Securities (“ILS”) and as of June 2022 791 ILS were listed on BSX with an aggregate market issuance outstanding of $53.7 billion and representing approximately 90% of global issuance.
While the insurance industry is undoubtedly an important line of business for the BSX, growth in international debt listings continues.
Long-term insurance and reinsurance, which help protect consumers from underfunded retirement years and unsupported dependents, is a growing market globally and a fast-growing sector within Bermuda’s insurance market. Recent amendments to insurance legislation have paved the way for the Bermuda Monetary Authority to create two innovative initiatives: an insurance regulatory sandbox and an innovation hub. The purpose of these is to facilitate and promote the development of technological innovation in the insurance sector.
Bermuda is also persevering in positioning itself to become a global leader in climate risk finance solutions and addressing the estimated $1.2 trillion global protection gap – those corporate entities, municipalities and countries that are uninsured or under-insured. With the island’s long history of providing catastrophic peril coverage through innovative vehicles such as ILS, the BSX will continue to play an important role in this area as the leading exchange for international listing services for ILS securities.
Bermuda is a significant centre for traditional and alternative investments. Innovative legislative and regulatory developments continue to invigorate Bermuda’s asset management industry. Many of the world’s leading asset allocators, as well as new fund management and administration firms, have chosen Bermuda as their launch platform. Thanks to the BMA’s cooperation agreement with European Union states, new and existing Bermuda-based funds and fund managers can seamlessly conduct business with the European market and many leading US and European private equity groups have either domiciled structures in Bermuda or have interests in Bermuda funds.
The BSX recently celebrated 50 years in operation, moved its administrative and commercial operations to a new location at Exchange House in Hamilton and implemented significant upgrades to the technological infrastructure as part of the continued integration with parent Miami International Holdings, Inc. (MIH), which acquired full ownership of BSX at the end of 2020. This acquisition assisted MIH in expanding its world-class technology and derivatives trading and regulatory expertise to address emerging markets, such as digital assets, and provide the BSX with additional support in the evolving global reinsurance risk market.
As a full member and representative for the Americas region on the board of the World Federation of Exchanges (WFE), BSX brings a unique perspective to the board in relation to the issues and opportunities confronting all members of the WFE, and in particular the smaller WFE members. The BSX is also an affiliate member of the International Organization of Securities Commissions and globally recognised, including by the SEC.
The BSX continues to embrace and develop Environmental, Social and Governance (ESG) initiatives and in May last year joined the United Nations (UN) Sustainable Stock Exchanges (SSE) initiative as a Partner Exchange. The BSX looks forward to the annual WFE General Assembly and working with member exchanges to further the goals and initiatives of the organisation to enable fair, orderly and transparent markets and reduce global systemic risk.
About the BSX
BSX is a fully electronic, vertically integrated international securities market headquartered in Bermuda and organized in 1971. BSX specializes in the listing and trading of capital market instruments such as equities, debt issues, funds, hedge funds, derivative warrants, and insurance linked securities.. To learn more about the BSX visit https://www.bsx.com and or contact [email protected]