Still in the lead: Bermuda, the global leader when it comes to hosting captive insurance companies, held its first annual captive conference in September. The hope is that the meeting will boost interest in the island, which has seen its share of the captive insurance marketplace decline over the past 15 years as the island has become more expensive and as other jurisdictions have caught up.
It happens every so often, and the response is always the same. Registrations drop off in one or another of the major captive captive
said of naturally wild or feral animals kept in captivity for educational and scientific investigation with no attempt being made to domesticate them. jurisdictions, and the competition at once claims victory. Then, a year or two later, registrations go back up, and everyone else falls silent.
Two unexciting years in the Bermuda captive market have led to prognostications of an end to its thus-far permanent lead in the captive market. Net captive registrations in Bermuda increased only slightly in 2003 and 2004, as opposed to the 100 or so net companies that were being added in the early 2000s.
By contrast, some other jurisdictions have improved their tally. The Cayman Islands Cayman Islands (kā`mən), British dependency (2005 est. pop. 44,300), 100 sq mi (259 sq km), comprising three islands in the West Indies. has grown its captive base by 20 percent in the last couple of years. Vermont has also seen a solid increase. The British Virgin Islands British Virgin Islands
A British colony in the eastern Caribbean east of Puerto Rico and the U.S. Virgin Islands. Road Town, on Tortola Island, is the capital. Population: 21,700.
Noun 1. , Hawaii and Dublin have also been growing at a fair clip, albeit from a lower base.
The trade journals have rushed into print, under headlines such as "Challenging Bermuda's lead," and "Captive competition from the U.S. heats up." One went so far as to ask: "Do the latest figures signify sig·ni·fy
v. sig·ni·fied, sig·ni·fy·ing, sig·ni·fies
1. To denote; mean.
2. To make known, as with a sign or word: signify one's intent. the end of Bermuda as a captive domicile domicile (dŏm`əsīl'), one's legal residence. This may or may not be the place where one actually resides at any one time. The domicile is the permanent home to which one is presumed to have the intention of returning whenever the purpose ?"
The answer is no. The number and percentage of non-Bermudian captives is still growing, even if Bermuda's share of the global total of active captives is down to about a third from a fairly constant 40 percent a few years ago.
Affecting Bermuda's market share are a number of factors:
* The opening up of the global captive market to about 50 jurisdictions, plus a couple dozen U.S. states A U.S. state is any one of the fifty subnational entities of the United States, although four states use the official title "commonwealth". The separate state governments and the federal government share sovereignty, in that an American is a citizen both of the federal entity and that now allow captive operations in one form or another.
* The development and increasing popularity of risk retention groups, whose relatively small size makes them not especially suitable for domicile in Bermuda.
* Savvy Savvy® Gynecology A contraceptive vaginal gel that ↓ transmission of STDs–eg, HIV, chlamydia, gonorrhea. See Contraceptive. marketing by a number of other leading jurisdictions, notably Vermont and Hawaii, which have the advantage of being American.
* Developments in the type of corporate vehicles available, such as the introduction of segregated account companies, that have skewed skewed
curve of a usually unimodal distribution with one tail drawn out more than the other and the median will lie above or below the mean.
skewed Epidemiology adjective Referring to an asymmetrical distribution of a population or of data the statistics.
* The natural effect of economic and insurance cycles.
* The many different ways in which jurisdictions count their captives. Should a company that was a captive, but has now been dissolved dis·solve
v. dis·solved, dis·solv·ing, dis·solves
1. To cause to pass into solution: dissolve salt in water.
2. , be counted? Some jurisdictions think so.
Apart from a long-standing tradition of not criticizing the opposition, and the "Spitzer effect" that still has insurance executives fighting shy of saying much of anything, the view among Bermuda's captive management community appears to be that there really isn't much to talk about anyway.
It's just the cycle, they say.
BERMUDA STRENGTH: SIZE AND SCALE
On background, Bermuda captive managers argue that captives incorporated in Bermuda are significantly larger when measured by premium volume than those of any of the competition, which makes incorporation comparisons odious.
They also point out that efforts in the past couple of years to attract rent-a-captives to Bermuda are only now beginning to bear fruit; that the overall numbers may not be increasing as fast of late, but the Bermuda service providers are still working flat-out to meet demand; that insurance has been so successful that growth is exceeding the community's ability to accommodate it, so a little breathing space is welcome; and that Bermuda is not alone in experiencing lower rates of captive growth than had been the ease. Guernsey and Barbados have also been flat.
Bermuda's captive management service providers are not without concerns, however. Each new set of statistics that shows slippage Slippage
The difference between estimated transaction costs and the amount actually paid.
Slippage is usually attributed to a change in the spread.
See also: Spread, Transaction Costs
Slippage in the lead, however slight, is greeted by some as a harbinger har·bin·ger
One that indicates or foreshadows what is to come; a forerunner.
tr.v. har·bin·gered, har·bin·ger·ing, har·bin·gers
To signal the approach of; presage. of doom. A relatively light year for incorporations always sets off an internal debate as to the sustainability of what has been a remarkable track record.
Bermuda's share of the captive market has been eroding for a while. In the mid-1970s, about 80 percent of the global captive market could be found listed on notice boards at the entrance to the offices of Bermuda's two largest law firms This list of the world's largest law firms by revenue is taken from The Lawyer and The American Lawyer and is ordered by 2006 revenue:
AN ERODED e·rode
v. e·rod·ed, e·rod·ing, e·rodes
1. To wear (something) away by or as if by abrasion: Waves eroded the shore.
2. To eat into; corrode. HEGEMONY hegemony (hĭjĕm`ənē, hē–, hĕj`əmō'nē, hĕg`ə–), [Gr.,=leadership], dominance, originally of one Greek city-state over others, the term has been extended to refer to the dominance of one
Back in the day, when the world boasted fewer than 500 captives, Bermuda's hegemony was complete. But in time, every successful market leader inspires competition. Once Bermuda made a core economic activity out of captive management, other jurisdictions decided that what was good for Bermuda could be good for them, too.
Now that an estimated 4,800 captives exist around the globe, having a third of them is keeping Bermuda busy.
Of the competition, Vermont, the Cayman Islands, the British Virgin Islands and Hawaii have all found sufficient room to build stable and meaningful captive sectors of their own. Among them, their total number of captives exceeds Bermuda's. Each offers different advantages and areas of expertise. The competition they have introduced has broadened the market.
One other reason that Bermuda's share has fallen is cost. Bermuda is expensive, as are most offshore facilities. Cost matters most to smaller captives and those that operate on slimmer margins. The global spread of the captive franchise in the 1990s drew in mostly midsize and smaller companies because the majority of the major players had captives in place by the mid-1980s.
It might be argued that cost does not work exclusively to Bermuda's disadvantage. Its target client base is comprised of the larger U.S. corporations and their European and South American equivalents. Reputation is easily the most important element of the captive-formation decision for such organizations; the quality of professional expertise and ease of access are also important. Cost is barely a factor.
Then, too, a herd mentality Herd mentality describes how people are influenced by their peers to adopt certain behaviors, follow trends, and/or purchase items. Examples of the herd mentality include the early adopters of high technology products such as cell phones and iPods, as well as stock market trends, is at work in corporate circles. Corporate architecture is not advertised; its development spreads through word-of-mouth and media coverage. Some Bermuda captive owners will confirm that they view the island as an exclusive club that prospers on quality, not quantity.
This is not to say that Bermuda might never lose its charm, or its competitive edge, or its dominant position in captives or other branches of insurance. The island cannot develop captive managers as quickly as it needs them, and so must import guest workers to meet demand. That places stress on the infrastructure, especially housing, schools and traffic. A perpetual movement exists in Bermuda that calls for the introduction of a taxation system aimed at companies rather than people, and at overseas companies rather than Bermudian people, to balance inequalities This page lists Wikipedia articles about named mathematical inequalities. Pure mathematics
As yet, this group remains on the fringe On The Fringe is a popular Pakistani television show on Indus Music. It is hosted and scripted by the eccentric television host and music critic, Fasi Zaka and directed by Zeeshan Pervez. , but its voice is always heard, mooting the argument that Bermuda would be better off without the wealth that insurance and the allied disciplines have imported.
But thus far, the nattering nabobs have failed to capture the public attention.
ROGER CROMBIE, a writer, editor and former accountant, is a regular columnist columnist, the writer of an essay appearing regularly in a newspaper or periodical, usually under a constant heading. Although originally humorous, the column in many cases has supplanted the editorial for authoritative opinions on world problems. for Risk & Insurance[R]. He also covers issues on alternative risk. He can be reached at firstname.lastname@example.org.