Discussing: Panellists at the Insurance Day Summit, from the left; Roger Gillet (Ace), Tony Hulse (KPMG), Shelby Weldon (BMA), Bradley Kading (ABIR) and Christopher Klein (Benfield).

Bermuda is on the right track with its greater regulation of the insurance and reinsurance industry in Bermuda and has, as a result, seen the Island's reputation improve measurably.

However, it should be careful to strike a balance between robust regulation and something that might become too stifling to innovation and the speed with which business can be conducted through the Island.

So said analyst Christopher Klein at the second day of the Insurance Day Summit in Hamilton, appearing on a panel discussion about how far regulation can go without damaging Bermuda's reputation.

He was joined in the discussion by Tony Hulse, head of wholesale and reinsurance markets practice with KPMG LLP UK, who said clarity, certainty and transparency were the key elements that will give Bermuda a regulatory reputation respected around the world.

The work of the Bermuda Monetary Authority, its expansion to 100 staff to cover the Island's financial institutions, was explained by Shelby Weldon, the BMA's director of compliance insurance.

While Bradley Kading, president of the Association of Bermuda Insurers and Reinsurers, used a number of newspaper headlines from around the world to highlight the change perception of Bermuda as an increasingly respected jurisdiction with international standard regulation.

Mr. Kading said that would be important going forward as EU directives take affect in Europe where many Bermuda-based companies have operations and business, and the expected 2010 introduction of "Solvency 2" requirement for third country reinsurers to meet EU standards.

And he added that companies seeking to set unregulated businesses now knew not to try to do so in Bermuda.

Mr. Klein, head of counterparty risk at Benfield Industry Analysis and Research, said: "Why Bermuda? Tax and simplicity.

"Those are two reasons why a lot of people come here. The ease with which a company can be established here has been proved to be valuable and helpful in the wake of very large catastrophes.

"Then there is an impression that has been driving the market over the last two or three decades and perhaps the regulatory framework has been trying to catch up with the concentration of capacity and capital on the Island.

"The long list of things we have heard is very encouraging. Public statements of Class 4 reinsurance companies is the bane of the analyst who is unable to get hold of the reporting accounts for an unlisted Class 4 Bermuda company. Very often they have to make do with, if they are part of a group, the SEC 10K of a US listed company or the various quarterlies or if it is listed in London the published reports and accounts.

"Bermuda has a very interesting role. The principle role of the BMA is to protect policyholders' rights and I think Bermuda has a unique role, because if you think of how many policyholders there are in Bermuda there are not that many."

He added: "The traditional role of a regular is to protect its domestic constituency. The policyholders here are all over the world and many are major industrial and financial institutions and indeed countries in some instances.

"So when you think of the size of Bermuda it is punching massively above its weight. So one should not be surprised that it is under the microscope so intensely. It is to Bermuda's credit that it has been able to survive so far without a big blow up."

As a warning, he recalled the collapse of HIH Insurance in Australia in 2001 which left $4 billion in unpaid claims and a trail of personal and financial disaster in that country's worst corporate collapse.

Mr. Klein said: "I find it interesting to think back to Australia when HIH blew up and that came at the tail end of explosion of the Australian bucket reinsurance market. That was what stimulated APRA (Australian Prudential Regulation Authority) to introduce an RBC (risk-based capital) type regulatory framework in that country.

"If something like a HIH happened in Bermuda it would reverberate much more widely than the HIH crash in Australia, which was essentially a domestic issue.

"So it is absolutely essential that the regulatory framework here is seen to be robust. That does not mean that it has to be onerous, stifling business. It is an important advantage that capital can flow in and out freely, absolutely essential in the catastrophe business. so the sooner Bermuda can progress onto some of the more dynamic forms of regulation and principles that will be good."

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