Business in Bermuda2011

Business in

BERMUDA

4 T he Bermuda Monetary Authority Prepares for an Important Year 5 Private Banking in Bermuda 10 MarketTalk with KRyS Global

SPECIAL REPORT 2011

Corporate Recovery & Insolvency Fraud Investigation & Forensic Accounting Litigation Support Business Valuations Regulatory Compliance Money Laundering Investigations Business Advisory Services

Guiding Your Way To Success.

KRyS Global, a specialized corporate recovery and insolvency firm, is a team of independent, dedicated and knowledgeable professionals with practical expertise, global experience and the ability to provide objective, sound advice.

We provide solutions to complex cross-border issues in the areas of Corporate Recovery, Insolvency, Forensic Accounting and Business Advisory Services. With over 40 professionals who work from offices in four jurisdictions, our Clients benefit from a close-knit team of Professional Accountants, Lawyers, Certified Fraud Examiners and Certified Anti-Money Laundering Specialists. Through vigilance, dedication and thoroughness, we are committed to being the global leader in our industry, delivering results and achieving exceptional value for our Clients. www.KRyS-Global.com TM

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INTRODUCTION It was perhaps American author Mark Twain who best described the lure and magic of Bermuda when he first penned the phrase, “You go to heaven if you want to.

I’d rather stay in Bermuda” over 100 years ago.

The tiny island situated in the Atlantic roughly 1,000 kilometres off the East Coast of the US, has evolved with relative ease during the last few decades, from being a small tourism destination for the wealthy, to what it is today - a leading, well respected premier international financial centre.

2011 marks a significant year in Bermuda with the transition of the new government, inspections of the jurisdiction’s readiness for Solvency II equivalency, and the effects of the financial crisis fully exposed. Bermuda has had a challenging and tough 2010, even the Insurance market has felt the pressure with a softening market and little or no increase to premiums effecting companies bottom line. This has led to an increase in M&A in the market. Despite a prolonged soft market and the global economic recession, according to the Bermuda Monetary Authority, Bermuda insurers recorded an increase in aggregate total assets to $496 billion in 2010 (2009: $472.9 billion). Total gross premiums written remained strong, at $119.7 billion, compared to a 2009 total of $123.5 billion. The Captive sector has done particularly well with a 66% year on year increase in gross premiums written. Bermuda has also managed to continue to attract new entities to their shores in 2010. New company registrations by (re)insurers totalled 35, with market entrants including captive and commercial insurers covering various lines of business, including property and catastrophe and professional liability.

Historically the insurance industry has been capable of pulling up the market but with many companies facing their own problems, the economy has felt the effects. Although the market is upbeat around the Solvency II inspections, there are still questions to be asked of European legislators, questions that affect certain segments of the industry significantly more than others. Business in Bermuda 2011

will highlight how the jurisdiction has prepared itself for the inspections this summer and will focus on some interesting new opportunities the private sector is working on.

In October 2010 the new elected Premier, Ms. Paula Cox, took office as the first female leader in Bermuda’s history. Premier Cox was the former Minister of Finance and has kept that position as well as becoming Premier. This means the Progressive Labour Party retains power once again while the United Bermuda Party is still facing severe leadership problems to mount any significant challenge.

The Ministry of Business Development and Tourism have now combined with new leadership. Minister Patrice Minors has taken up this role in which she brings a wealth of experience in international business and finance.

There will also be a new strategy adopted for tourism in Bermuda which has seen a significant drop since the financial services industry took over as the island’s main income provider. The newly appointed Tourism Board is a mix of tourism professionals and executive level business professionals from across the private sector who have been bought together to address the issues facing the sector and to help re-launch it. The idea here is to bring new energy and ideas into a declining sector which faces increasing competition from regional counterparts and hasn’t expanded into new markets for years. Historically Bermuda has enjoyed an extremely good partnership between the public and private sector, and this is something Minister Minors plans to reintroduce to the Bermuda tourism product.

The Association of Bermuda Insurers and Reinsurers (ABIR) continues to play a strong leadership role for the sector in advocating on new European and US Legislation. The Association and the BMA regularly meet with policymakers in Brussels and European regulatory leaders at EIOPA. Of course the US is also trying to pass regulations that could significantly affect Bermuda by way of punitive tax penalties on foreign competitors to US insurers;

info@globalinvestmenti.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 The views expressed in Business in Bermuda Special Report 2011 are not necessarily those shared with the publisher, Global Investment I Limited. Wishing to reflect the true nature of Bermuda, the editor has included articles from a number of sources, and the views expressed are those of the individual contributors.

No responsibility or liability is accepted by Global Investment I Limited for any loss to any person, legal or physical, as a result of any statement, fact or figure contained in Business in Bermuda Special Report 2011. This publication is not a substitute for advice on a specific transaction.”

and socialization of natural disaster risk. ABIR plays a key role in representing its members interests to policy makers and regulators in major markets and documenting the important economic contributions of Bermuda’s major (re)insurers in global markets.

Bermuda’s new government has already come out with major budget cuts for this fiscal year in a sign that the new leadership is committed to returning the country to a surplus. The government has also broken ground on a new hospital, The King Edward Memorial Hospital, which will give work to a construction sector that has been slow since several commercial buildings closed out in 2010. Overall Bermuda is looking forward to a key year in both their Solvency II and Basel III equivalency tests. The island seems to be in the unusual position of having complete buy in from the private sector.

Bermuda is achieving all main goals in their financial services industry and will continue to be an off-shore leader for years to come. With the appointment of the new Tourism Board, Bermuda might finally be able to generate the fresh ideas and enthusiasm that made it a playground for the elite so many years ago. n

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Business in Bermuda

The Bermuda Monetary Authority Prepares for an Important Year The Authority prepares for Solvency II Equivalence Inspections.

The Bermuda Monetary Authority is the sole independent regulator of Bermuda’s financial services industry, which includes Bermuda’s banks and deposit companies, investment businesses, trust companies, money service businesses and insurance companies. As a risk-based regulator, the Authority applies a regulatory framework that is practical and effective for the local market and aligned with prevailing international standards. The effectiveness of the Bermuda framework and the Authority’s commitment to high-standards in regulation has been recognised over the years by international assessors of its regime, most recently by the International Monetary Fund in their latest review of Bermuda’s financial regulatory provisions.

However, despite having received high marks in the past, the Authority has not rested on its laurels. As it continues to develop Bermuda’s regime the Authority is now focused on the next regulatory test—achieving regulatory equivalence of its framework with other major international markets. Regulatory equivalence, the process whereby one jurisdiction reviews another jurisdiction’s regime and deems it as equal to its own, and the harmonisation of international regulatory standards, are two critical elements in global financial regulation today. The benefits of regulatory equivalence are far-reaching in that it enables companies in equivalent jurisdictions to conduct business on non-discriminatory terms and avoid possible duplicative regulation and capital charges. From a regulatory perspective, equivalence also supports higher standards in regulation in general.

Bermuda’s current focus is on achieving regulatory equivalence for its insurance framework with Europe’s Solvency II Directive. This is an important goal for Bermuda given the significant volume of business conducted by Bermuda-based insurers with the European market. 2011 marks a very important year for the Authority as Bermuda was chosen by the European Commission as one of three countries to be in the first wave of third-country (non-European) assessments under Solvency II, alongside Switzerland and Japan.

The Authority has made significant progress in its work plan to enhance Bermuda’s insurance regulation in line with the technical requirements under Solvency II. To date the Authority has implemented the Bermuda Solvency Capital Requirement, a risk-based solvency standard and capital adequacy model for large commercial insurers; established the application review process and standards to permit use of insurers’ internal capital models to determine regu-

latory capital; developed a framework for group-wide supervision of Bermuda’s insurers; hosted and participated in a number of supervisory colleges; introduced the Insurance Code of Conduct that establishes strong governance and risk management standards proportional to the nature of a firm’s business; and implemented a new require¬ment for the largest Bermuda insurers’ to file public general purpose financial statements.

With much of the policy infrastructure to support its enhanced regime in place, the Authority is now focused on implementation of the various components of the supervisory programme resulting from such changes. The Authority also established a strategic resourcing plan to address the specific needs associated with meeting the requirements of its enhanced regime. The two-year plan, which is an integral part of the organisation’s overall equivalence strategy, calls for the recruitment of additional highly-experienced staff for senior positions to support and execute the new regulatory standards and processes resulting from the framework changes. These additional staff will also provide further expertise for implementing key elements of the Authority’s enhanced regime, such as group-wide supervision.

In addition to building up its people resources, the Authority is taking measures to use technology to improve its supervisory effectiveness by introducing enhanced reporting and analytic tools. The objective is to use electronic processes strategically to create greater efficiencies, richer data analysis and improved reporting capability from the Authority’s systems. The main initiative involves facilitating greater levels of automated filing by firms, and standardised data reporting. The standardisation of data will enable the Authority to enhance its capabilities for intra- and cross-sectoral analysis for supervisory purposes. These steps aim to ensure that further collaboration between the Authority and other regulators will be possible through group-wide analysis and solvency calculations under the newly implemented group supervision framework.

Overall, the Authority is well positioned to meet the regulatory goals it has set for itself and is looking to maintain momentum as it continues with its programme of strategic regulatory changes.

Along with achieving regulatory equivalence, the Authority’s regulatory framework changes are designed to maintain a robust, effective regime for Bermuda’s financial services market. In this way, the Authority looks to continue to support Bermuda’s position as a wellregulated, first class jurisdiction for financial services. n

“The progress Bermuda has made to

date in enhancing their programme for

the solvency regime for insurer’s means

that the jurisdiction is among the top in preparing for Solvency II equivalence. “

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Business in Bermuda

Private Banking in Bermuda An inside look at a quiet industry.

Whilst Bermuda is a financial centre for insurance and reinsurance it has not been a centre for banking in the way that other jurisdictions are. Banking in Bermuda is strictly regulated with a limited number of licenses available. It is nevertheless an extremely attractive jurisdiction for private clients by virtue of its robust regulatory regime, efficient consumption-based tax system, and commonwealth-based legal system. The banks in Bermuda have an international outlook and highly experienced teams that work with clients around the globe.

Bermuda’s financial industry has for some years now, had risk-based capital adequacy requirements and mandatory stress testing of assets. Basel II was introduced for the banking sector in 2009, and the BMA has laid out a clear roadmap for achieving equivalence with Europe’s Solvency II regime.

Bermuda Commercial Bank has always been a conservative bank and maintains a very high capital adequacy ratio. As of our last audited financial results for the year ending 2010 our ratio was 26.6%, considerably stronger than international standards. We hold no impaired assets, nor did we invest in the instruments that have caused problems for banks around the world. We had already adopted a risk-based approach to our business in 2007 and converted to the IFRS accounting standards for 2010. For us the introduction of tougher standards was not at all difficult.

Challenging Environment for Bank revenues worldwide Every bank does business differently and structures their revenue streams accordingly. Other factors generally include how efficiently a bank manages their assets and their operations, and the level of quality of their book of business. We must also consider that the regulatory costs continue to increase. Banks with big mortgage and lending portfolios are under pressure, and those with high leverage models will be accordingly more at risk.

Around the world we’ve seen deposit rates drop and loan rates increase as banks seek stronger margins to offset depressed business and increased risk. We don’t see a great deal of innovation right now with so many banks coping with other problems.

Clients paying more attention to risk We’ve seen clients become far more sensitive to a few keys issues. They are paying more attention to risk and moving away from banks with lower capital adequacy ratios, excessive leverage and convoluted balance sheets. They are looking at sovereign risk issues and demanding strong fiduciaries and trustees.

Interestingly our clients and their intermediaries also welcome increased dialogue with the bank and are pleased at the level of access we give them. As trusted advisors our clients depend on us, they haven’t

By Horst Finkbeiner Chief Operating Officer and Director Bermuda Commercial Bank Limited sought to be more ‘hands-on’ but this dialogue is very important to them.

Our clients are much like ourselves and are generally fairly conservative and look towards wealth preservation. Some clients have ‘sat out’ the market turmoil, but the general tone has been to keep portfolios balanced and diversified.

Bermuda Commercial Bank Services BCB offers a range of services to private wealth, corporate and commercial clients around the world. Our Trust company provides true fiduciary services and handles family business, personal and commercial trusts and special purpose vehicles for commercial transactions. BCB Fund Services provides accounting services and global asset custody for investment funds of all kinds. And of course we provide banking, cash management, and asset management services.

Recently we’ve seen business slowly recover from the global financial crisis, with our clients becoming more active again in their markets. Deposit levels are increasing again, and our fund clients are increasing their AUM. About 40% – 45% of our business is international in nature, with the strongest growth from Europe and Asia.

Expansion Plans BCB is a bit different from many other banks in that we emerged from the GFC with an intact balance sheet and a conservative business model.

We see considerable opportunity in the markets we serve and are looking to expand our business reach into new jurisdictions. One example is the strategic investment that we made in 2010 in Westhouse Securities, a London investment firm.

Our model is very client-centric and we will build wealth management solutions for our clients that fit our conservative risk profile. We recently released new flexible-term fixed deposit products in multiple currencies which have proven very successful. We have continued to invest in technology that supports our approach to flexible product creation and delivery as well as deliver a robust control environment. n

Business in Bermuda

A Law Firm Specialising in the Future Why Bermuda is such an attractive jurisdiction for business.

What kind of work does Trott & Duncan focus on in Bermuda?

What are your expansion plans?

We are a full service law firm that works with both international and local clients. Our clients are banks, financial institutions, multinationals, small and medium sized enterprises, and high-net-worth individuals. We work with some of the biggest employers in Bermuda including banks, government ministries, hotels and light industry. Our core services are litigation, property, corporate, banking and trusts.

All areas of the firm are currently busy although the greatest pressure is on our litigation team which is acting on some of the largest litigation matters presently going to the courts. We are also fortunate in that as we work with both the local and the international markets that the impact of the current recession has been minimal and in fact provided us with opportunities to grow.

“Our future is looking very bright as the firm has continued to rapidly expand over the last four years. During that period we have doubled in size and we are continuing to take on new staff.”

Our future is looking very bright as the firm has continued to rapidly expand over the last four years. During that period we have doubled in size and we are continuing to take on new staff. At our monthly strategy meetings we actively review new opportunities in the market place and move quickly to make sure that our clients get the services they are looking for.

What legislation favours Bermuda in both corporate structures and private structures? What structures are attractive for corporations in the UK looking to expand business abroad?

There are several main drivers of the Bermuda economy that are of interest to your readers: • Low tax jurisdiction (no corporate tax, no VAT, no inheritance tax, no capital gains, no personal income tax) • Very good regulator (Bermuda Monetary Authority) • Good infrastructure (lawyers, accountants, and other support providers) • A legal system based on English law.

In other words, your readers will be familiar with the laws as they are based on English law and it is an easy place to do business. If you

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carefully structure your personal wealth or corporate structure then you can take advantage of paying low tax especially when compared to current rates in the UK. For individuals we recommend looking at trusts and estate planning, and for corporate structures we suggest having a Bermuda company as a part of the international structure. In particular, we are finding that companies based in the UK which find their traditional markets have declined are now looking to expand internationally to find new areas of growth. Many of them use Bermuda as a location for their parent company. These types of businesses are of a wide range and size and include family owned businesses. For example, recently we have been working with a company that wants to expand to Brazil but also has business in the Philippines and Hong Kong.

In Bermuda there are a wide range of companies operating internationally that include small and medium sized enterprises, many of which are privately owned or family run. These types of companies are often trading companies with international operations. The larger companies, such as multinationals, use Bermuda as a base for their partner company and for asset holding ( for example a company holding a satellite, yacht, or intellectual property rights).

One other area of growth is the family office. A family office manages investments and trusts for a private family with the capital being the family’s own wealth. We are increasingly seeing interest in and use of Bermuda as a base for this type of business especially from the USA and UK. Bermuda is one of the best jurisdictions in the world to locate a trust, a company, or a family office. Individuals should ask about using Bermuda for personal tax structuring. Companies should consider Bermuda as a jurisdiction to hold assets, or as a base for a parent company for international trading. Bermuda has the infrastructure of financial advisors, accountants, lawyers and other professionals to fully support the activities of all these types of businesses.

Is there an extreme amount of due diligence on the part of the service provider in order to set up either a corporate or private structure? What kind of examination process is there involved and how long does the process typically take?

The know-your-client procedures for Bermuda are comparable to those in the UK. They are enough to make sure that money laundering is prevented but flexible enough to make sure that there isn’t too much red tape. It must be remembered that Bermuda’s reputation as a financial centre, for example, as the third largest re-insurance centre in the world after New York and London, is not jeopardized by bad publicity from money laundering. When we undertake our know-your-client procedures it may take 2-3 days depending on how quickly the client can obtain the relevant information. n Delroy Duncan (dduncan@td.bm) - Litigation Perry Trott (ptrott@td.bm) - Trusts Nicholas Johnson (njohnson@td.bm) – Corporate and Banking

Trott & Duncan Limited

is a full service law firm and one of the most prominent providers of legal services in Bermuda to both the local and international markets. Our lawyers are highly trained professionals with first class experience in Bermuda and other major financial service jurisdictions.

Services: Corporate & Company

Litigation, Arbitration & Dispute Resolution

Private Client, Trusts & Estates

International Tax Structures

Banking & Finance

Insolvency

(Re)Insurance

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We are a progressive and dynamic firm that holds the highest professional values in our work. We have a reputation for providing creative, practical, and commercially orientated solutions.

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Trott & Duncan Limited Trott & Duncan Building 17A Brunswick Street, Hamilton HM10 PO Box HM 2094, Hamilton HM HX, Bermuda TEL: (+1) 441.295.7444 FAX: (+1) 441.295.6600 EMAIL: info@td.bm WEB: www.td.bm

Business in Bermuda

Maintaining the Culture to Succeed Why a strong emphasis on underwriting allows Arch Capital to expand in turbulent times.

Can you tell us a little bit more about the culture at Arch Capital Group and how this ties in with the group’s success?

Arch Capital has an underwriting culture that is knowledge and skill intensive. We provide a range of specialty insurance and reinsurance coverage where knowledge of the underlying risks allows us to provide a better fit with the client’s needs. We also stress underwriting discipline, which is particularly important during this cycle. An important part of our success is also our conservative investment approach and capital management. We also consider our employees to be our most valuable asset and seek to reward them in a manner consistent with our underwriting approach.

What kind of year was 2010 for Arch Capital? How has the economic downturn and softening of the reinsurance market impacted the group?

Arch performed well in what was a very difficult year for the insurance industry. Despite economic and political troubles around the world, the industry also had a number of catastrophic losses in an investment climate that produced few opportunities. Arch Capital earned $491M for the year ended December 31, 2010 and produced a 12% return on equity for the year which we feel was an acceptable return given a difficult operating environment.

“The insurance industry remains a highly competitive market where underwriting of insurance risk makes the difference between producing a profit and reporting losses.”

What keeps Bermuda an attractive base for major (re)insurance and financial companies? Do you expect to see more high level departures this year?

The history of innovation, which is the hallmark of Bermuda, has brought a critical mass of like-minded individuals. This concentration of talent attracts talent and resources from around the world ensuring that Bermuda will remain a key market for insurance for the foreseeable future. As the Bermuda market has matured, it is only natural that successful companies would expand their operations and that is what you see today - successful companies expanding their presence around the world.

What are your plans for 2011? What challenges do you foresee?

Where do you see the highest growth potential in 2011?

Can you tell us a little bit more about the Lloyds 2012 syndicate?

How did it perform in 2010? How are you using the Lloyds vehicle in expansion plans?

The insurance industry remains a highly competitive market where underwriting of insurance risk makes the difference between producing a profit and reporting losses. We believe these conditions favour companies like Arch, where underwriting expertise allows better risk selection. Growth, unfortunately, will be very difficult because many of the risks we are asked to underwrite today fail to meet our profitability requirements. So, we have to take a patient approach to growth.

Significant growth will come to Arch, but only at a point where we can achieve a reasonable return on our shareholders’ capital.

Our Syndicate 2012 is a perfect example of global expansion. We created Syndicate 2012 just two years ago so that we could reach markets that do not travel to Bermuda and risks which are unique to the Lloyd’s market. So today, in addition to writing through the Lloyd’s market in London, we are writing insurance covers in South Africa and Australia, for instance, that provide a broader mix of business than we could achieve operating solely in Bermuda or London. The difficult economic and political environment means that we are cautious about growing today, but the worldwide licenses of Lloyd’s will be an important part of our future.

With increasing pressure on the industry with worldwide regulatory reform, how is Arch Capital managing to stay competitive and ahead of the market?

In 2008, Arch Capital partnered with Gulf Investment Corporation to form Gulf Re. How has this partnership developed and why has Arch decided to enter the Middle East and Gulf region?

How has this relationship progressed?

Around the world, the insurance industry is one of the most highly regulated industries and the performance of property casualty insurers during the economic crisis of 2008 and 2009 demonstrated that we have a strong and effective regulatory environment. European insurers are beginning to implement a new regulatory framework known as Solvency II, which is expected to improve how European insurers measure risk and allocate capital to maintain a vibrant industry. Here in Bermuda, we have been working towards equivalency with this framework, and the good news is that much of what Solvency II seeks to do, we have already been doing in Bermuda.Our history as an industry in Bermuda is one of innovation and risk modelling that fits well with the goals of Solvency II.

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A few years ago, we had the opportunity to form a joint venture in Dubai with the Gulf Investment Corporation. The joint venture focuses on the six states of the Gulf Corporation Council. The Middle East has tremendous growth potential as petro-dollars are invested in local projects and we wanted to be a part of that future. The Middle East is not an easy market, of course, and we wanted a partner with local knowledge that we could merge with our proven underwriting management skills.

Today, Gulf Re is a small reinsurer on the world stage, but we believe in the future Gulf Re will be a major reinsurer in the Middle East. n Dinos Iordanou, Chairman, President and CEO, Arch Capital Group Ltd.

Business in Bermuda

Bermuda Still Leading the Captive Market Highlighting the premier event in the Captive professionals calendar.

The captive industry in Bermuda started in 1962 with the incorporation of International Risk Management Solutions the first company to provide administration of client’s captives.

This marked a significant point in Bermuda’s history as captive management to this day is still a very important core activity on the island and major source of both revenue and Bermuda’s ability to maintain a source of highly talented and experienced workers. The bulk of Bermuda’s captives are US-owned entities, often used to insure and reinsure retentions on general liability, auto liability, workers compensation, property and marine programs and to access the reinsurance markets. Many are single-parent captives, insuring only the risks of their parent and affiliates. Because of this, Bermuda is home to major divisions of Aon and the Marsh McLennan Group of Companies, the

“Bermuda’s regulatory environment has always been and will continue to be an evolving environment, and always following or even setting international standards for insurance regulation. “ two largest captive managers in the world. The industry has faced stiff competition over the last few years, mostly from US States like Vermont, Florida, and Arizona not to mention several others. Although Ireland and Switzerland often get mentioned, the real competition comes from the US where State governments seem to be keen on attracting new sources of revenue, thus new industries. Bermuda still leads in newly licensed captives with Bermuda edging out Vermont in 2010 by roughly 10%.

The Bermuda Insurance Management Association (BIMA) was formed in the late 1970s. The objectives of BIMA, as set out in its constitution include; i) to protect the interests of members and clients, ii) to liaise with Government and/or any association or body on matters

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affecting the insurance industry, iii) to provide a unified approach to problems and opportunities that may be of concern to the Associations Members and iv) to encourage professionalism of the members in the carrying out of their business. At the moment the membership comprises of 43 of the Island’s licensed insurance managers.

In 2011 the Association expects to see more interest in Bermuda from the Canadian and Latin American markets. The US market will continue to be interested in Bermuda. Bermuda’s regulatory environment has always been and will continue to be an evolving environment, and always following or even setting international standards for insurance regulation. Obviously keeping a close eye on Solvency II and the Island’s route for equivalency will be a key issue for the industry in 2011. BIMA feels that to obtain equivalency, there should be no major change to the regulatory regime for captives as the regime is effective and is in accordance with international standards. Whether EU legislators feel the same will be the major water cooler conversation in 2011.

2011 marks the 6th year of the Bermuda Captive Conference and the conference has been growing with the industry. The typical attendee is a Bermuda captive owner, service provider, investment manager/banker, and risk managers considering establishing a captive in Bermuda. The opening session of the conference will be a round table discussion with the Premier of Bermuda, Paula Cox, Jeremy Cox from the BMA, Grace Shelton who is the US Counsel on the Island and Rees Fletcher, President and CEO ACE Bermuda, and Tom McMahon, President of BIMA. The conference has a large attendance list with industry representatives from Canada, the US, and Europe. There are several goals of the conference but ultimately it is to garnish information from the leaders in the industry and gain insight from veteran captive owners. BIMA certainly hopes to have more attendees from Latin America and Asia this year for exactly those reasons. Historically these large markets haven’t shown interest in the use of captives but with heavy marketing and road shows in the regions on behalf of associations like BIMA and Business Bermuda interest has been peaked. Of course the opportunity to learn information to make your own entities captive succeed and the networking opportunities are all good reasons to attend this conference. n

Fairmont Southampton Resort, Bermuda June 5 - June 8, 2011 www.bermudacaptive.bm

Business in Bermuda

MarketTalk with: International responsiveness with a local outlook.

Can you tell us a little bit about the key services KRyS Global offers?

KRyS Global provides solutions to complex cross-border issues in the areas of Corporate Recovery, Insolvency, Forensic Accounting and Business Advisory Services.

KRyS Global has over 40 professionals who work from offices in four jurisdictions – Cayman Islands, British Virgin Islands, Bahamas and Bermuda. Each office has a team of independent, dedicated and experienced professionals with practical expertise, global experience and the ability to provide objective, sound advice.

Why did you choose to open an office in Bermuda? Who are your main competitors in the Bermuda market?

We saw the need for an office in Bermuda to support our operations in the Cayman Islands, BVI and Bahamas and to provide another alternative for clients seeking insolvency and corporate recovery services in Bermuda. Being an independent firm without audit and advisory service offerings, KRyS Global is not faced with potential conflicts of interest as many of our competitors are. Some current engagements have a Bermudian element and having an office locally provides the firm with some economies which will benefit our clients. We saw an opportunity to provide professionals, particularly attorneys and financial institutions in Bermuda, with a wider range of choice for these services.

What are the key advantages for clients when dealing with an independent and specialised firm like KRyS Global? What key markets does KRyS Global operate in?

KRyS Global operates from offices in the Cayman Islands, British Virgin Islands, Bahamas and Bermuda although our work is global in nature, with engagements more often than not involving asset recoveries and litigation across the world. We have a network of similar independent firms who work with us in other jurisdictions, particularly in Asia.

In large cases such as Fairfield Sentry, the largest feeder fund into Bernie Madoff ’s Ponzi scheme, the liquidator needs to be free of conflict in pursuing third parties for recoveries. As noted, because KRyS Global does not offer audit and advisory services, we do not have issues of conflict arising.

Being a smaller independent firm enables KRyS Global to give clients a more personal service. KRyS Global’s practical hands-on approach ensures all clients receive remedies and results specifically suited to their needs and demands.

Our staff are qualified and experienced in cross border insolvency, forensic accounting and restructuring and are leaders in their field.

All engagements are carried out by closely managed teams led by a dedicated director.

Individuals and corporations all over the world are increasingly looking for more liquidity from their investments. Have you seen increased activity in dissolving and liquidations of funds, captives and other financial instruments in the markets KRyS Global serves? How is KRyS Global involved in this process?

In a recessional environment people have a greater need for liquidity and become more diligent in regards to understanding their investments. We have seen increased activity since the financial crisis, which commenced in the last quarter of 2008, mainly due to the economic environment flushing out incidents of fraud. The recession caused a number of investors to conduct additional due diligence on their investments and client relationships. These increased inquiries found inconsistencies and concerns which led to an additional need for our services.

We are often asked by clients to do an orderly wind down of investment vehicles or other entities undertaking a restructure. Having a specialist firm undertake that work, who are experienced in identifying and addressing the risks that arise, provides an additional layer of comfort for the directors of those entities.

What trends do you see in 2011 in terms of insolvency and corporate restructuring and recovery in the region and the world? What impact do you see this having on global economic recovery?

We expect to see a steady flow of work during 2011 as some of the issues brought to the fore during the financial crisis remain unresolved.

Within the region there was an increase in work during 2010 and we do

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Business in Bermuda

By Kenneth Krys, CEO, KRyS Global and Brian Patterson, President, KRyS Global Bermuda

not expect that to slow within the current year. The issues still affecting parts of Europe are still to play out and it remains to be seen whether these events will have any major impact on the global economy.

KRyS Global has had some high level fraud investigation and forensic accounting cases. What high profile cases is the firm dealing with at the moment?

KRyS Global is involved in some of the larger, more complex and unique international and cross-border assignments in the Caribbean. This demonstrates our reputation for clear decisive action, creative solutions and impartial advice which has facilitated the growth of the firm since the onset of recession.

Our larger engagements include SPhinX Group, Fairfield Sentry, and Sextant Funds. All of these engagements involve elements of fraud, cross-border litigation and highly complex issues requiring highly specialised strategies to recover assets for the benefit of creditors.

global in nature. With offices in four leading offshore centres in the Caribbean, we are in a strong position to offer solutions in the region for global clients. Having all offices under one brand signifies the unity of the firm and provides a single identity, so our clients understand that we are one firm and that we share resources between offices.

Our continually expanding international and cross-border experience, together with KRyS Global’s reputation for providing innovative and creative solutions to complex issues, confirms our position as a leader in insolvency and restructuring in the Caribbean. Coming together as KRyS Global will emphasise our culture and strengths; that of an independent, forward thinking international organisation offering highly personalised service.

We will continue to identify markets where our unique skills and experience can add value and be of benefit to our existing organisation.

“Our continually expanding international and cross-border experience, together with KRyS Global’s reputation for providing innovative and creative solutions to complex issues, confirms our position as a leader in insolvency and restructuring in the Caribbean.”

What were the reasons behind the firm rebranding to KRyS Global? Does the firm have plans to diversify its service offering going forward? What new markets does KRyS Global see opportunity for growth in?

The new name signifies the firm’s recent growth and expansion into additional international markets and reflects our work, which is

What personal message would KRyS Global like to send to the London marketplace?

When working offshore you want a firm that has local knowledge, extensive experience dealing with cross-border matters, and practical solutions to what can be extremely complex and potentially costly issues. KRyS Global has that perspective and experience. Assignments are carried out by closely managed and dedicated teams ensuring that results and exceptional value are delivered to clients. n

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New Class ‘A’ Commercial Space S.E. Pearman Building 9 Par-la-Ville Road, Hamilton

Prime Office Space Available Now! Please Contact Kitty Pearman for further information.

SAGO Ltd P: 441 535-0141 (MOBILE) 441 295-5113 (OFFICE) Email: kitty @onc.bm Web: www.sagoltd.com

Business in Bermuda

Redefining Bermuda Tourism What is Bermuda’s curBy Patrice Minors rent tourism product?

Minister of Business Development and Tourism What type of tourist do you typically see?

Bermuda’s current tourism product is made up of 2780 hotel rooms, comprising three large hotels that are over 200 rooms, headlined by the two Fairmont Hotels that cater to groups, corporate and leisure business. This is further accentuated by an upscale collection of predominately small to medium sized hotels under 100 rooms.

There are over 45 hotels which are under 100 rooms in capacity. Bermuda’s product is highlighted by magnificent beaches; championship golf courses; rich historical sites including the town of St. Georges a UNESCO World Heritage site; a diverse restaurant product; great shopping and an excellent infrastructure for transportation with its bus and high speed catamaran ferry service.

The majority of visitors, over 70%, are from the North East coast of the USA and Canada and have household income of over $125,000. The average age of this tourist is 45 – 65 and comprises couples taking a quick vacation getaway 2 hours from the east coast. Visitors coming on honeymoon or destination weddings or playing golf make up a niche section of the market. Approximately 18% of visitors annually come for business.

The Bermuda tourism product and brand is in need of updating. What are the Ministry’s plans in this area? How are you looking to improve both the Bermuda product offering and the Bermuda brand?

The Ministry of Business Development and Tourism is the lead Ministry tasked with encouraging and stimulating new investment in the hotel industry product in particular. The Ministry executive team have full regular contact with all potential hotel developers and provide the service of guiding these developers through the process of gaining all process approvals in expeditiously.

The Minister of Tourism has appointed a new Board of Tourism who have been tasked with developing a National Tourism Plan that will address all aspects of improving the tourism product infrastructure as

well as clearly defining Bermuda’s brand. This paln is expected to be completed by mid summer.

The Hotel Concessions Act has been the main mechanism used by the hotels to redevelop their product. It is envisaged that this Act will be updated in the future to be more broad reaching to all sectors of the industry, both large and small.

What are the goals and plans of the ministry for boosting visitor arrivals to Bermuda whilst ensuring the best experience?

How will you achieve this?

The goal of the Ministry is to continue the very focused approach to seek out business from the markets and regions of highest potential.

The goal is also to maximize more efficiencies with all money that is being spent to market the destination. The plan is also to maximize the efforts on the new services of Westjet Airlines out of Canada as well as Airtran Airways which commences service out of Baltimore and Atlanta this spring.

The department also plans to solidify its new partnership with the Bermuda Hotel Association with the Tourism Fund and expect that this new initiative, with new additional marketing funding, will assist in boosting air arrivals in the months ahead.

Formulating the National Tourism Plan will be the main goal that charts the strategic direction going forward.

The Ministry is now encompassing both the tourism and International Business sectors. What were the reasons for combining these ministries? How will this help both sectors?

The Ministry is designed to help strengthen the economy, enhance our competiveness and look for new sources of business so that our economy remains healthy and vibrant. The Ministry has the primary role in crafting and facilitating progressive policies and practices for both of the current pillars of Bermuda’s economy – Tourism and International Business. There is considerable synergy as well as efficiencies to be gained by having these lines of businesses combined. Bermuda’s proximity to the North East Coast of the United States not only brings tourists to the island but also allows the our island because of its sophisticated and reputable business environment and infrastructure leverage to create more economic benefit in both sectors.

A Buyer’s Market For the first time in year’s Bermuda’s commercial real estate market has several opportunities.

Successful economic growth over the years, coupled with past exchange controls and limited investment opportunities, has resulted in Bermudians building wealth through residential and commercial real estate holdings. Today's real estate market continues to offer opportunities to many, although under supply and over demand have driven prices up in recent years. Many factors, including the number of comparable properties on the market, location, and the state of the economy affect the price you can expect to pay for either rental or sale of a property in Bermuda. Property sales to international purchasers are regulated by the Bermuda Government in an effort to pro-

tect the balance of foreign ownership.

Over the last year many commercial buildings in Hamilton, the capital city of Bermuda, have come online enhancing the inventory.

These buildings reflect the workmanship of the construction firms in Bermuda with the finest materials and latest technology throughout several floors of office space. One project in particular, the S.E. Pearman Building is a prime example of affordable office space in a market that is typically hard to find long term leases at good value. Floor spaces in the S.E. Pearman Building are available either as a single tenant with prices starting from as low as $45 sq.ft/pa or can be divided into two or three tenant options. This is to accom-

modate any type of business who might want to relocate to Bermuda but may find renting a whole floor too large or too pricey for their needs. The building will feature a landscaped entrance plaza and will be fully accessible at grade entrance. The lobby elevator services all six floors plus the basement.

One thing for sure is that now is the time to enquire about commercial property in Bermuda. There are several office buildings that have recently come online and the market has a wide range of opportunities for the first time in several years. This coupled with the fact that you can ride a water ferry into work every morning and view out onto to the Atlantic at lunch would surely be enough to peak interest. n

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Less Red Tape‌ More Red Carpet The Ministry of Business Development and Tourism is designed to help strengthen our economy, enhance our competitiveness and look for new sources of business so that our economy remains healthy and vibrant.

The Ministry looks forward to welcoming your business.

2 Floor, Government Administration Building, 30 Parliament Street, Hamilton HM 12, Bermuda 1-441-295-5151 • www.gov.bm

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Our disciplined underwriting principles drive the solid results we’ve achieved and that puts us in a strong position to meet market needs.

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