Chidozie Ofoego was named the new Financial Secretary at the Ministry of Finance. He will be responsible for the finance ministry’s headquarters, Accountant-General’s department, the Department of Social Insurance, the Office of the Tax Commissioner, Customs tariff and duty collection, and the Registrar of Companies. His previous experience includes working for the London Borough of Hounslow and as director of financial reporting and planning at Imperial College London. 

Gemma Rochelle has been promoted to to executive vice-president, group general counsel and chief compliance officer at BF&M. She has also been promoted to the group executive committee.

Hamilton Insurance Group named two new directors to its board: Therese Vaughan, a former CEO of the National Association of Insurance Commissioners, the standard-setting body for insurance regulation in the US, and Neil Patterson, the retired chairman of the KPMG group of entities in Bermuda, who will also serve as chairman of the Hamilton board’s audit committee.

Everest Group has promoted Jim Williamson to lead its reinsurance and insurance businesses, adding to his existing responsibilities as Everest’s executive vice-president and group chief operating officer.

Robin Saul has been appointed deputy managing director and legal counsel at Arch Insurance (Bermuda). She joined Arch in 2019 as head of claims and legal counsel, and will retain her current responsibilities in addition to her expanded new role.

Greg Hendrick, the CEO of Bermudian-based Vantage Group, has been appointed as an independent director on the board of Verisk, the global data analytics and technology provider.

Clarien Bank has appointed Roger Brown as senior vice-president and head of commercial banking. He will be responsible for managing Clarien’s growing portfolio of high-value client relationships within the commercial, corporate and institutional sectors. Mr Brown was previously a regional vice-president in Commercial Banking at Laurentian Bank in Toronto. 

Jamie Schmerer has been promoted to the role of SVP, Enterprise Risk at Fortitude Re. His responsibilities will include leading Fortitude Re’s regulatory relations efforts in Bermuda.

Charles Craigs has joined Ascot Group as managing principal overseeing the company’s third-party capital operations in Bermuda. Mr Craigs joins Ascot from Canopius Re, where he spent 15 years in executive leadership roles, most recently as CEO of the Canopius Bermuda platform.  Ascot also announced the appointment of Dane Lopes as head of US Partnership Engagement & Strategy.

The Everen Specialty board of directors appointed John Talarico as chairman and Tim Bucci as deputy chairman.

Chris Sinkey has been appointed to the new role of chief operating officer at Relm Insurance, the specialty carrier supporting emerging and innovative industries. He will oversee sales and marketing, operational excellence, and corporate development, including capital raising and M&A.

International General Insurance has promoted Stav Tsielepis to the post of group chief actuary, with responsibility for capital, pricing, reserving and exposure management.

Rosemarie Minors has been appointed manager, Compliance and Regulatory Affairs and Privacy Officer at Axa XL in Bermuda. The company also announced the appointments of Tiffany Heslop, vice-president, senior underwriter, Excess Casualty, Insurance and James Gregory, vice-president, senior underwriter, Professional Lines, Insurance.

Juniper Re, the reinsurance broker, has appointed Chris Hayward as head of office to lead its new Bermuda operation.

The post Movers and shakers appeared first on RG Magazines.

After years of increasing costs, the outlook for Bermuda’s local business community brightened in the first quarter with the increasingly realistic prospect that at least some costs could start to fall over the next two years.

The reason is the imminent corporate income tax (CIT): the first estimate of what it will add to government coffers came in David Burt’s Budget statement in February — “at least $750 million a year”, the Premier and finance minister said. That is the equivalent of 60 per cent of the Government’s revenue estimate for 2024-25. Such a boost would create considerable opportunities for cutting taxes.

With CIT funds expected to flow in from July 2025, Mr Burt floated ideas including seeding a new health insurance fund with capital to support implementation of universal healthcare and cutting duty on fuel, food and construction items in the next fiscal year. And by 2026-27, he suggested employer payroll tax could be reduced.

The good news is there is little sign of a vanishing tax advantage sparking an exodus of international companies of economic substance, although much attention this year will be focused on the nature and size of qualified refundable tax credits, which will be critical to domicile decisions being considered in boardrooms.

The Government has signalled that companies within scope of the CIT will no likely no longer pay the employer’s share of payroll tax.

How the impact pans out will depend heavily on the ongoing work of the Tax Reform Commission. Led by Darren Johnston, the TRC has been tasked with making recommendations on tax credits, revisions to the tax system, how CIT funds should be spent for the community’s benefit, and legislative or constitutional guardrails (perhaps to ensure that a certain proportion of the money pays down debt or tops up the underfunded Contributory Pension Fund).

The deadline for the TRC’s final recommendations is the end of October this year.

It all seems too good to be true, and ironic, that Bermuda appears set to benefit enormously from a global minimum tax regime designed by large countries to effectively drive business away from offshore financial centres.

The new rules, the result of an Organisation for Economic Cooperation and Development initiative, require multinationals with revenue over 750 million euros ($815 million) to pay a rate of at least 15 per cent by allowing governments to apply a top-up tax on revenues earned in countries with lower rates.

Could the CIT prove to be a fiscal and economic lifeline? Only time will tell.

***

One of the reasons why Bermuda’s international re/insurers are not looking to take flight at the first sign of a tax on profits is that the island is a genuine global hub for the industry with a cluster of world-leading talent and regulation that meets the highest international standards.

A powerful reminder of that was the third Bermuda Risk Summit in March. The Bermuda Business Development Agency event attracted more than 450 delegates, 40 per cent of them from overseas, including re/insurance executives, regulators, risk managers from companies including Amazon, and industry media.

The BDA estimated that the event generated around $3.4 million in economic activity, supporting 432 jobs. But as the BDA observed: “Far more significant were the long-term economic benefits brought about by the additional visitors who flew to Bermuda for business meetings during the week of the summit.”

The post All eyes on Tax Reform Commission appeared first on RG Magazines.

The demolition work taking place at 91 Front Street this year heralds a rejuvenation for a Hamilton site previously occupied by a boarded-up building.

Brookfield is the company behind the nine-storey development, which will act as the headquarters for all of the company’s Bermudian-domiciled listed affiliates — Brookfield Reinsurance, Brookfield Property Partners, Brookfield Infrastructure Partners, Brookfield Renewable Partners and Brookfield Business Partners.

There will also be office space for tenants and retail space on the ground floor, on both the Front Street and Reid Street sides of the building. In his 2024-25 Budget Statement, David Burt, the Premier and Minister of Finance, estimated the project to construct the building would support about 200 jobs over an 18-month period.

What exactly is Brookfield? While Bermudians are accustomed to seeing large offices bearing the name of re/insurance companies, it is unusual to see international companies in other industries owning their own office building on the island.

That’s not to say Brookfield does not have insurance interests — its insurance solutions business, founded in 2020, has already grown to have more than $100 billion in assets under management. Part of it is Brookfield Re, which purchased Bermudian-based Argo Group in a $1.1 billion all-cash deal that closed in November last year. However, insurance is only a small part of the vast global network of Brookfield companies with head offices in Toronto and more than 200,000 employees around the world.

On the face of it, there could be few better businesses on the planet to oversee a real estate development. Brookfield’s real estate division owns more than 500 million square feet of prime real estate around the world, including London’s Canary Wharf.

The philosophy underpinning these investments is “high-quality properties in the best locations, as well as the strong tenant basis and long-term leases they attract, will withstand market cycles and drive long-term value”.

One of Brookfield’s most remarkable projects is Manhattan West in New York. The eight-acre, mixed-use complex was built on a platform over rail tracks running into Penn Station. It has revitalised the Hudson Yards district with four office buildings, an apartment block, the Pendry West Manhattan Hotel and a 2.5-acre pedestrian plaza, open to the public.

In addition to real estate, Brookfield’s $900 billion portfolio includes infrastructure, renewable energy, private equity, credit and insurance. One of its infrastructure businesses is Triton International, the world’s largest lessor of intermodal freight containers, a Bermudian-based company acquired last year by Brookfield Infrastructure Partners in a $13.3 billion deal.

Brookfield’s connections with Bermuda have attracted some controversy around its tax practices. A report last June by the Centre for International Corporate Tax Accountability and Research (CICTAR) was titled, “Brookfield’s Bermuda base: is Canada’s largest alternative asset manager dodging global taxes?”

The report stated: “Brookfield’s structure has been described as a cascading ownership pyramid, with local subsidiaries controlled by complex chains of foreign entities with direct investments through individual investment funds ultimately winding up in Bermuda.”

A search of the Bermuda Registrar of Companies website found 282 entities bearing the Brookfield name — 16 more than were mentioned in last year’s CICTAR report. Brookfield Ltd appears to have been the first one to form, with an incorporation date of January 27, 1998.

The International Tax Review, when it reported on the CICTAR report in June last year, quoted a Brookfield spokesman as saying: “We are committed to providing relevant and proportionate disclosure about our tax payments in accordance with recognised reporting frameworks and in a manner that is both informative and transparent.”

The new Front Street building will increase certainly Brookfield’s economic substance in Bermuda. Brian Kingston, chief executive of Brookfield’s Real Estate business, said in March last year when the plan was first announced: “This development is a reflection of our commitment to Bermuda, one of the most sophisticated financial and business markets globally, with access to top talent. We see numerous opportunities for growth in the coming years.”

On its website, the company says in real estate, it has a “focus on ‘placemaking’ —creating places for people to live, work, dine, shop and play”. Bermudians will hope that is reflected in Hamilton.

Brookfield did not answer our requests for comment for this article.

The post Corporate giant behind new Front Street building appeared first on RG Magazines.

“Game changer” may be an overused phrase these days, but in the case of Generative Artificial Intelligence and its potential to transform business, it is an undeniably apt description.

Global management consultant Accenture says GenAI portends “likely the most significant change to work since the agricultural and industrial revolutions”. It promises to cut out drudgery and massively increase productivity. Businesses in Bermuda and around the world are scrambling to harness its power.

Stuart Lacey, founder of the Bermuda Clarity Institute and a recognised expert in GenAI solutions and tools, leads AI workshops at the BCI’s New Venture House home. In these popular sessions, he has seen mixed reactions — many people excited to put GenAI to work and some fearing for their jobs.

Historically, technological revolutions — from the printing press to electricity to the silicon chip — have followed a pattern of adoption, with each successive wave occurring at a faster pace than the preceding one. “Today’s pace of change is accelerating like a freight train and you need to try to get on,” Mr Lacey said.

Citing the name of the inventor of a history-changing, 15^th-century printing press, Mr Lacey said: “If you analyse those ‘Gutenberg moments’ in history, 20 per cent of the impact was human replacement and 80 per cent was human augmentation. Most people tend to focus too much on the job replacement aspect and miss the other four-fifths of the historically-proven impact, which is the growth and value created from human augmentation.”

Using an analogy with the familiar concept of horsepower, Mr Lacey cites the example of a solopreneur who could suddenly go from one to about 20 humanpower by using GenAI to effectively have a finance team, researchers and a marketing crew, for example.

What are the use cases for Bermudian businesses? Mr Lacey and Aaron Smith, BCI’s AI growth leader and president of the Igility Group of Companies, gave multiple examples, grouped into several categories. They include:

• Content generation: GenAI enables the creative generation of content, from targeted marketing materials to product development plans, amplifying productivity and creativity
• Content rewriting: repurposing existing content or translating into multiple languages to target different groups, particularly beneficial in marketing strategies
• Extraction: extracting structured information from unstructured data sources like text documents
• Data analytics: drawing actionable insights from rapid analysis of datasets, such as financial statements
• Social media management: crafting tailored social media posts based on customer data and target audience preferences, mirroring the work of a dedicated social media team
• Meeting optimisation: revolutionising corporate meetings by summarising discussions in real time, eliminating the need for manual note-taking and allowing outcome to be shared efficiently

“HR is a classic example of a use case that people in our workshops tell us they go back and implement immediately,” Mr Smith said. “We show them how to thoughtfully put together company information and a job profile and turn AI into your extended HR team. It will help you to assess candidates, identify skills gaps in resumes and design interview questions.”

Mr Lacey points out it is not the technology itself that delivers benefits to a business, but how users interface with it. Training the workforce is not only essential for effective AI implementation, but also to win over people feeling threatened, by showing how their current role could be expanded rather than eliminated.

“Prompt engineering” — the process of asking AI for something — is how humans interface with the technology. Typing in a single, brief instruction, will rarely be enough. An essential skill is “prompt stacking”, the crafting of a series of prompts to steer AI towards the desired outcome.

“Rushing to put shiny new tech in without paying attention to data rights, privacy and proper training will not achieve its full potential and waste time and effort,” Mr Lacey said.

“First, companies should do an AI audit, a diagnostic and strategy document to assess AI readiness. That means take stock of where you’re at first: consider what software you need, what data you can put into the models, consider privacy and data rights, ideal use cases, low-hanging fruit — and then move forward on an informed basis — ‘less haste equals more progress’.”

BCI has launched an AI audit service and recommends businesses undergo this process in parallel with staff training. Additionally, BCI is rolling out fractional AI services, giving businesses access to an AI worker to enable a controlled implementation at a fraction of the cost of hiring an expert.

For more information, visit https://clarity.framer.ai

The post Bermuda businesses prepare to tap into power of AI appeared first on RG Magazines.

Bermuda’s economy has changed markedly over the past 30 years and international business has become a much larger part of it.

That was one clear takeaway from the Bermuda Chamber of Commerce’s “Deep Dive” — an extraordinary release of data, illustrated in a series of graphs, which have provided much food for thought for business leaders, policymakers and the community.

A handful from the trove of eye-opening statistics:

• IB generates more than one third of Bermuda’s total employment income, or 34.5 per cent, up from 11.6 per cent in 1997; over the same period hospitality and retail’s share of wages has fallen from 20.4 per cent to 10.4 per cent
• The number of IB jobs rose by 984, or 25 per cent, between 2019 and 2023 — Bermudians and their spouses, and permanent resident certificate holders accounted for 55 per cent of this job growth; high-value insurance jobs were a feature, with the number of underwriters up 26 per cent and actuaries up 45 per cent
• From 1993 through to 2023, hotel and guest house room count fell by 56.6 per cent, while jobs in the accommodation sector fell by two-thirds
• Retail sales volume fell 8% between 1995 and 2023, while the number of jobs filled has fallen 3.6% — there is a notable correlation between the two statistics over the past three decades.

Marico Thomas, Chamber president, and Danielle Riviere, chief executive officer, came into their roles last year with a mission of providing data to provide a much-needed factual basis for conversations on the island’s future.

The Chamber’s Economics Division led the research and the results were unveiled in February at the Chamber’s Budget Breakfast, where David Burt, the Premier and Finance Minister, was a special guest.

While the aim of the Deep Dive was to provide accurate, actionable information, rather than offer opinions based on it, Mr Thomas said it was clear there had been structural changes in the economy.

“There was a time when tourism was the big gorilla of the Bermuda economy and taking a career path as a bartender would allow me to buy a house, or buy a taxi, and put my kids through college,” Mr Thomas said.

“That has changed. The story around international business when I was a teen is remarkably different from the ‘what do you want to be when you grow up?’ conversation I have with my kids. When you look at two data points — IB’s share of GDP and tourism’s, the 1980s and 1990s compared to now — you can see that the conversations in business meetings will also be different.

“Some of those impacts have not necessarily resonated throughout the conversations in every dining room and boardroom — you have some people who still reflect on how things once were. We are just trying to ensure that people are having those conversations based on accurate information.”

Ms Riviere stressed that the Deep Dive was only the start of a more data-driven Chamber. With plans for more data releases in future, the Chamber is urging members to share information when asked to help paint as accurate a picture as possible.

“This is not a one-off conversation,” Ms Riviere said. “It’s not just about the data, we really want people to understand that good information can help to change behaviours.”

A useful indicator of IB’s impact comes from the Association of Bermuda Insurers and Reinsurers’ annual economic substance report. ABIR, which represents many of the largest international re/insurers with operations on the island, has tallied a staggering direct impact of $12.84 billion on Bermuda’s economy over the past 15 years.

Included in ABIR’s calculations are salaries and benefits for locally based employees, travel and entertainment in Bermuda, including hotels, airfares, restaurants, taxis and catering, and donations to Bermuda charities, which totalled nearly $6 million in 2022 alone.

IB workers earned more than $1.3 billion in 2022, a significant injection of money into the local economy. The imminent corporate income tax, Bermuda’s response to the OECD’s global minimum tax, effective from January next year and levied on large multinational companies, is expected to massively increase the impact of IB. Mr Burt has estimated the new tax could raise $750 million per year — equivalent to about 60 per cent of the Government’s revenue estimate for the current fiscal year.

All this creates a “multiplier effect” with IB dollars coming into the economy circulating through multiple transactions of many kinds, from taxis and restaurants to rents and retailers.

However, Martha Harris Myron, a former financial adviser who was The Royal Gazette’s personal finance columnist for more than 20 years, cautions that statistics showing healthy GDP growth do not capture how much of the money is flowing straight off island.

“I believe Bermuda has a fragmented multiplier effect, for many reasons,” Ms Harris Myron said. “One is the high increase in money moved and spent abroad. Many IB workers are paid in US dollars and my impression is that many of their investments and savings are in overseas brokerage accounts and banks, including their pension funds, whose custodians are abroad.

“They also purchase properties overseas, partly because of the high prices on the island. I remember many years ago I had a client who said his family went to Florida and bought five houses — one for them and one each for the four children — for the price of one home in Bermuda!

“Many of our largest domestic companies are completely or partially foreign-owned, such as Belco, Butterfield Bank, HSBC (formerly the Bank of Bermuda), BF&M, Clarien and One Communications, so their profits and dividend payments flow off island.

“Then there is the money that we spend every year buying fossil fuels from overseas and the huge amount we pay to service the Government’s $3 billion-plus debt, nearly all of which is financed by US dollar bonds. I don’t understand why we do not have more Bermuda dollar-denominated bonds, so the Government’s interest payments would stay in Bermuda, instead of going to foreign creditors.”

Ms Harris Myron cautions against pinning high hopes on the corporate income tax. “We just don’t know if it will be an economic life-saver,” she said.

She is also concerned there may be a lack of foreign currency held in reserve in Bermuda — needed to fund overseas transactions. “The Government used to provide this number, but I cannot find it now,” she said. “I think everyone keeps hoping that US dollars keep flowing in from international business.”

The post Bermuda economy increasingly reliant on IB appeared first on RG Magazines.

Financial circumstances, family considerations, risk appetite and ambitions are unique to each person. And all are essential considerations for any investment plan. Mr Dooley said there are two basic approaches that LOM takes with clients planning to grow a retirement nest egg.

“We can run through it based on what you think you can put away every month or year between now and when you want to stop work,” Mr Dooley said. “Or alternatively, we can work with what you think you’re going to need in your first ten years of retirement, and then work backwards to calculate how much you will need to save.”

Inflation is a critical variable to consider. The past year alone has been a harsh lesson of how the cost of living can rise over time.

“You have to save enough for the years after work and make sure your savings at least keep pace with inflation, because in ten or 20 years, $1 million will not buy what it does today,” Mr Dooley said. “Inflation eats away at the value of your savings.”

The effect can be significant. For example, if inflation averaged a relatively modest 2.5 percent over the next 20 years, cumulative inflation over the period would amount to almost 64 percent. In other words, in order to have the purchasing power of $1,000 today, one would need about $1,640 in 2043.

Time is an investor’s friend — the earlier you start the better. Mr Dooley’s LOM colleague Jason Chlup, an investment adviser, offered an enlightening perspective on this during a local radio interview in June.

Based on average stock market returns over time, Mr Chlup said that to save $1 million in 10 years, one would need to invest $5,200 a month. Over 20 years, the same target would require $1,500 a month and over 30 years, about $580 a month.

While the numbers are approximate and the past is not an indication of future returns, the estimations make clear the value of starting early and the power of compounding returns. In the 30-year example, about 80 percent of the $1 million would be made up of investment gains and only 20 percent actual contributions.

As a rule of thumb, Mr Dooley recommended saving a proportion of income equivalent to half your age. “If you’re in your 30s and you’re in a position to save, then try to think about putting away 15 percent of your income. In your 50s, maybe if your children have flown the nest and you’ve paid off most of your mortgage, maybe you can try to save 25 percent. If you can, it’s good to save more as you approach the ‘golden years’.”

The investment landscape has changed markedly with the rise in interest rates, making fixed-income securities, such as bonds, more appealing than they have been for more than a decade. In mid-June, the yield on a 10-year US Treasury bond was trading at close to 3.8 percent, having climbed from less than 0.7 percent three years earlier.

Bonds tend to be less volatile than stocks, but generate lower returns over time. Getting the correct balance between the two in an investment portfolio is partly about age, Mr Dooley suggested.

“Since the great financial crisis of 2008, interest rates have been unusually low and holding bonds was only slightly better than burying your money in the backyard,” Mr Dooley quipped. “Having some bonds was still useful as a safety net, or a balance to your overall portfolio.

“But now we can get higher yields, it’s possible to make more than inflation on bonds, so I believe we can go back to the 110-minus-your-age rule — it used to be the 100 rule, but that has changed because we’re living longer.

“So, if you’re 40, 110 minus 40 is 70, so you could have 70 percent of your portfolio in equities and the rest in bonds and cash. If you’re 60, then maybe you should dial back to 50 percent in stocks.”

Diversification is another critical element of investing. Mutual funds that invest in multiple different securities are one way of avoiding the all-your-eggs-in-one-basket risk. LOM manages several funds with differing strategies, from money-market and fixed-income funds to equity growth, innovation and opportunity, and emerging-markets funds.

LOM’s Stable Income Fund is one Mr Dooley suggested could be especially attractive to retirees. It invests largely in what he calls “boring equities”, such as electric utilities, oil giants and pharmaceuticals, and makes monthly payouts that amount to an annualised dividend yield of 3.9 per cent.

“These are mature companies that may not grow as fast as younger ones, but they are more stable and throw out a lot of cash to shareholders,” Mr Dooley said. “Also in the fund, we have some longer-duration hybrid securities, such as preferred shares with a $25 par value, an area of the market that most people don’t pay too much attention to, but where we have found some good yields.”

So, what should a rookie investor look out for in an investment adviser? Mr Dooley, who is a chartered financial analyst, suggested it should start with credentials.

“I’m not saying that everyone with credentials is a stand-up person, but I do know that to become a CFA, you have to go through a rigorous three-year process that shows you are dedicated to your profession and it includes an ethics element,” he said.

“Then I would look at the firm and the reputation it has in the community, how long it’s been around and who their clients are. Then it comes down to whether you have chemistry with your adviser and whether they’re asking the questions that really matter to you.”

This article is for information purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. Readers should consult with their brokers if such information and or opinions would be in their best interest when making investment decisions. LOM is licensed to conduct investment business by the Bermuda Monetary Authority.

The post Time is an Investor’s Friend appeared first on RG Magazines.

At the same time, there has been a plunge in the inventory of available properties, prompting bidding wars for attractive homes that do come up for sale.

Add to that a steep climb in the cost of borrowing — after the US Federal Reserve tried to tame inflation by raising its influential Fed Funds rate for ten meetings in a row through May this year — and one could understand a reluctance to commit to buy now.

This convergence of events makes it even more challenging for young people to buy a property than it was pre-Covid. It should not be surprising that many of the people applying for mortgages in Bermuda are in their 40s and 50s.

Peter Goodall is very familiar with borrowers’ challenges. The founder of real estate website Property Skipper, he also operates mortgage brokerage Marston Financial. He works with lender partners to help clients find the right borrowing solution. Generally speaking, as people get older, the duration of mortgages available to them gets shorter, he said.

“Typically, in Bermuda, depending on your job, lenders will take the view that most people want to work to 65,” Mr Goodall said. “If you’re in your 20s, or early 30s, you can probably get a 30-year mortgage, but there are caveats. If you’re 45, you could get a 20-year mortgage and at 50, you could get a 15-year mortgage.”

While the shorter durations mean higher monthly repayments, older borrowers also have advantages over younger ones, such as higher incomes at a more advanced stage of their career and a greater ability to save for a down payment.

Mr Goodall stressed that borrowing is still an option at age 65 and over, particularly for those with sound finances intending to buy an investment property.

“If you’re an older person, lenders would want to take a broader look at your finances,” he said. “They would want to see that you have earning power beyond the age of 65, for example, someone running their own business, continuing to work, or with property income. They are also likely to ask for a higher down payment, perhaps about 35 percent.

“We have seen many people in their 40s and 50s buying investment properties to provide retirement income later on. If you meet the lender’s criteria, there is no reason you cannot borrow to do this after 65.”

Buying properties to rent out has become more attractive during the past 18 months, given the sharp increase in rents, driven partly by scarcity of available rentals. About 50 rentals were available on Property Skipper in June, compared to some 500 pre-Covid, representing a fall of 90 percent, Mr Goodall said.

He attributed rocketing rents to multiple factors, including the loss of hotel beds caused by the closure of the Fairmont Southampton and the Elbow Beach resort, leading to many properties being rented out short term to visitors via websites such as Airbnb. More units were lost to the long-term rental market to house ‘digital nomads’, working from the island under the Government’s Work From Bermuda certificate.

“Also, apart from a few pockets of development, such as Riddell’s Bay, there have been very few large-scale building projects since 2010, so housing supply has not increased meaningfully,” Mr Goodall added. “The Government has talked about the need to increase the working population by 5,000, but it does raise the question of where they are going to live.”

Mr Goodall’s top tip for those seeking to buy a property, was this: get preapproval from your lender. With inventory having shrunk, the ability to transact rapidly is imperative.

“We have seen clients who’ve missed out on properties because they were not preapproved,” Mr Goodall said. “The seller has gone with either a cash buyer or someone who is preapproved. It really improves your chances if you have all your ducks in a row, so you can avoid any delays.”

Even some of those who were preapproved months ago have suffered a nasty shock when they finally found a property to bid for, because the spike in rates effectively moved the goalposts for them.

“We’ve seen a shift in the market over the past year that has made the process more difficult,” Mr Goodall said. “The five-year fixed rate has gone from about 5.25 percent to about 7.5 percent, depending on the borrower’s circumstances.

“That’s created a large knock-on effect. People who were preapproved last year and were thinking they could borrow at 5.25 percent have been left confused and frustrated when they realise the rise in interest rates means they cannot afford to borrow as much as they had planned.”

Whether to opt for fixed-rate or variable is always a difficult choice for borrowers, but particularly now. Does it make sense to fix your rate for five years, if you believe rates are due to fall after a string of increases? Age and personal circumstances should heavily influence the decision, Mr Goodall suggested.

“If you’re a younger purchaser and you’ve stretched yourself to raise the deposit, your income may be rising steadily, but you may have high outgoings, such as child care,” he said. “In that situation, I would advise that you ask yourself whether you could cope with an interest-rate shock. If the answer is ‘no’, you are better fixing your rate for five years to protect yourself from rate volatility.

“If you are a bit older and your financial circumstances are different, then you may take the view that interest rates may peak and start to fall in the next 12 to 24 months — especially if you’re lucky enough to receive an annual bonus that you can use to pay down some principal — then you’re probably better to go for the variable rate.”

The post Middle Age Mortgages appeared first on RG Magazines.

At the root of the problem are production delays caused by a lack of microchips. The average car contains about 1,300 chips — electric vehicles contain roughly twice as many.

In the early stages of the pandemic, microchip producers reduced output and shuttered plants, because they anticipated a slump in demand. At the same time, auto makers cut down their orders for chips. In reality, chip demand rocketed, fuelled by the mass switch to remote work and a spike in laptop sales, while, in the midst of lockdowns, online shoppers snapped all manner of chip-reliant devices.

Chip makers have been playing catch-up ever since and the production headaches for global auto makers have only been exacerbated by the war in Ukraine, where several key suppliers to the industry are located. It’s a perfect storm that has exposed the complexity and fragility of the auto industry’s global supply chain.

At Auto Solutions, a dealer which sells a range of global brands, including Hyundai, Suzuki and Nissan, Glen Smith, the managing director, and Harry Andrews, the sales and operations manager, described some of their challenges.

“We just put in an order to one of our manufacturers and they can only give us 20 per cent of what we asked for,” Mr Andrews said. “That’s the dynamic we’ve been dealing with.”

Mr Smith said demand for new cars has remained strong, even though he can sometimes only give buyers a rough estimate of when their new vehicle will arrive. The issue is especially acute with chip-hungry electric vehicles, an area of growing appeal for local car purchasers who want to reduce their carbon footprint.

“The Hyundai Kona, our electric car, has done extremely well,” Mr Smith added. “We have close to 90 deposits sitting there waiting for this car. Some of these orders go back to November 2021.” The company honours the original price for orders, but sometimes takes a financial hit, because by the time the car is delivered, the price the manufacturers charge is higher than budgeted, after months of production cost increases.

Although many customers are surprised and sometimes frustrated by the prospect of a months-long wait to get behind the wheel of their new car, most have been understanding when the reasons are explained to them, Mr Andrews said. Whether they agree to wait is often determined by the condition of their existing car. If the replacement need is urgent, they may settle for a model or colour that was not their first choice.

Supply challenges also relate to parts and Mr Andrews said Auto Solutions had come up with some “workarounds” to keep customers’ cars on the road, for example in the case of electronic control units (ECUs) that render cars inoperable when they malfunction.

“We were having to wait eight months to replace these ECUs and we could not have a customer off the road for that long,” Mr Andrews said. “We did some networking with our counterparts in the Caribbean to see if they had a solution, because we know we’re all in the same boat.

“We ended up shipping these units to Barbados, where we could get them refurbished. We even helped a competitor with a similar model, for which the ECUs are interchangeable, to do the same. As fellow members of the Bermuda Auto Dealers Association, we’re in a small market and we never know when we’re going to need each other. We help each other for the benefit of the customer.”

Most new cars arrive in Bermuda on the massive car transporter ships that make occasional visits to the island, bringing in stock from manufacturers around the world. Some local dealers also bring in cars from the United States on the regular cargo ship the Oleander.

Auto Solutions has capitalised on this option by renting a bonded facility in New Jersey, where it stores new cars delivered to the US. “Every day there are vessels going from India, Korea or Europe to the US — and we can get cars on those ships, get them transported to the East Coast and store them in New Jersey,” Mr Smith said. “When a customer wants one of those cars, we can deliver it within a week.”

At Renault dealer Eurocar, the most apparent issue has been the delay in the arrival of a new electric car model. Richard Davidge, president of Eurocar, said: “We were given the OK to import the new Renault Megane electric vehicle. It’s already out in Europe and it was supposed to be here now, but it’s been delayed until the end of the year, because of production issues, related to the supply of components.”

There have also been delays with the manufacture of parts that were made in Ukraine until the war forced plants to close. “One of our manufacturers needed a part that had to be reengineered by another supplier in a different country,” Mr Davidge said. “And before they would release it, it needed to be thoroughly tested. It meant a part that I used to be able to get in about three or four weeks took more than six months to get.”

Stephen Davidge, general manager of Eurocar and its sister company Prestige Autos, the Mercedes dealer, said the delays were longest for high-end vehicles. “Generally, you have to pre-order your vehicles at least a year in advance and it’s starting to extend even further out,” he said. “They’re already starting us to ask for our estimates of what 2024 will look like — that’s a difficult one.”

Eurocar’s smaller vehicles, such as the Renault Zoe, which includes less technology and fewer chips than the larger models, has been uninterrupted by the production crisis and is selling well. “Last year we had a very good year and this year, it has continued to be solid,” Richard Davidge said. “Part of the reason may be that we actually have cars in stock — and we are fortunate that we have manufacturer partners who have continued to supply us.”

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From concrete to glass to aluminium to countertop materials, prices have risen across the board, driven higher by multiple global factors.

Prices began to rise following a surge in building and home improvement projects in many western economies after the Covid-19 pandemic started. High demand coupled with supply-chain bottlenecks, labour and materials shortages, and a surging shipping costs meant construction inflation continued to soar throughout 2022.

Though there are signs that price increases for some products are starting to stabilise in 2023, this period has been challenging for contractors, building materials suppliers and their customers.

Lynn Hassell, business manager of Hasco Construction, a group comprising a building firm, home interior products supplier and importer, said materials inflation was unprecedented in her experience.

“I’ve been in the construction industry for more than 20 years and I don’t remember a time when inflation has affected so many different areas,” she said. “It’s plumbing and electrical supplies, block and cement, glass — everything you use in construction.

“The increases are so high that contractors in the middle of jobs are asking customers for extra, because the materials cost increases are so great. It’s never happened to this extent, as far as I can recall.”

In some cases, customers had taken out a bank loan on the basis of a quote for a job, she said. By the time the loan was processed, sometimes three to six months later, the company had to requote the job because of an increase in materials costs. Customers then had to ask their lender to borrow more.

“Sometimes the customers are understanding and sometimes they get upset — but this is driven by factors outside our control,” Ms Hassell said.

Hasco has been working to keep prices down in a variety of ways, she added. “We’ve been trying to purchase the item as soon as we’ve quoted to ensure, a) that it’s in stock and b) to get it at the same price,” Ms Hassell said.

Sometimes the firm has sought alternative products or different suppliers.

Hasco Imports, the group’s shipping business, has a warehouse in Virginia where it employs two people. This gives the firm added flexibility in buying and holding stock, seeking out bargains locally and building strong relationships with suppliers in the area. When a customer finds a product online from a US supplier, Hasco invites them to send the relevant link and it will order and ship the product to Bermuda.

Steven Barber, owner and managing director of Commercial Glass & Aluminum Co, was last year hit with a single 40 per cent increase in the price of glass from a Canadian supplier, prompting him to switch to US suppliers. “I’ve seen nothing like it,” said Mr Barber, who has been in the business for more than four decades. “Over the past 30 years the price had barely changed, so this was a real shock.”

His company is a supplier and installer of windows, storefronts, swing and sliding doors, curtainwalls and aluminium railings. The rapidity of the price increases has caused issues with quoting on jobs.

“We say our quote is valid for 30 days, but we may not be awarded the job for three or six months and then we’ve sometimes had to increase our estimate by 10 or 20 per cent,” Mr Barber said. “On a couple of projects, the client just cancelled the job.”

Aluminium prices have also gone up, but more gradually, he added. Overland freight costs, driven by spikes in fuel prices and scarcity of truckers, have been an aggravating factor.

“We were quoted $600 on a freight delivery from Miami to Jacksonville. That price was built into our estimate when we quoted on a job, but the freight ended up costing $2,400. From the time you acquire a project, order a material and have it ready to ship, it might be three to six months. When prices jumped like that, we sometimes lost out.”

For Alex DeCouto, president of construction company Greymane, the price of concrete is of great concern and, unlike most building materials inflation, a Bermuda-specific problem, due to the main local quarry running out of material, creating the need to import aggregate. He is also concerned that Bermuda’s “concrete supply chain” is effectively controlled by a small group.

“Cement is supplied exclusively by one vendor, MaxCem, aggregate will now be supplied in the main by one vendor, ICS, and concrete will be manufactured using these two ingredients by two vendors, but SAL controls a large proportion of the market,” Mr DeCouto said.

“That is two or three people essentially setting the price of concrete in Bermuda. Barriers to entry for each of these segments are massive, with huge capital investment required and significant shifts in buyer patterns. I am very worried that these price increases will make projects unfeasible in the near future.

“The impact of this will need to be observed over the next three to six months as potential projects come to bid and new material costs are programmed in. Cost-to-value measures might torpedo those projects.”

On January 1, SAL advised its industry clients that the price of 3,000 psi concrete had increased from $278 per cubic yard to $406, an increase of 46 per cent, while the price of 8in and 10in concrete block had increased 50 per cent. It attributed the hikes to a loss of a key local supply of aggregate.

Supply-chain problems have eased for materials such as lumber and metal, but anything with electrical components still has issues, Mr DeCouto said, adding: “Some projects are 52 weeks long but the electrical panels are on 60-week lead times, for example. From discussions with vendors, there doesn’t appear to be an easing in sight.”

Greymane, he said, was working with customers to try to limit the impact of inflation. “On our current jobs, we’ve pushed for clients to place orders for all the sub components of projects as early in the project as possible to lock in vendor pricing.”

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The pandemic sparked an increase in demand for single family homes, new rentals and renovations that has helped to keep contractors’ order books full. And there are signs that 2023 could usher in a series of huge developments that will further add to the industry’s workload.

The largest — and the most important for the island’s economy — is the refurbishment of the Fairmont Southampton by owners Gencom. At the time of writing, Gencom had just signalled that work was due to start in the second quarter of this year, while David Burt, the Premier, said in his Budget Statement that confidence was high that it would be completed in 2024.

Alex DeCouto, of Greymane Construction, speaking in mid- February, said the months ahead would involve plenty of hard work to meet that goal.

“I know the intention was very aggressive scheduling, but it will be an absolute mammoth task to get the plans that I have seen fully executed before January 2025,” he said.

The Fairmont, where about 800 people were employed before it closed down in 2020, is more important for the Bermuda economy as a whole than it is for the local construction industry, in Mr DeCouto’s view. He expects that much of the work will be done by US contractors. Local companies that do participate will probably need to bring in extra workers from overseas, given that 30 per cent of the industry’s workforce is already non-Bermudian.

“Government’s strategy on large projects has generally been to allow those resources to come in, but to ensure that opportunities are created for Bermudians to work and advance, and I agree this is absolutely the correct strategy,” Mr DeCouto said.

Steven Barber, managing director of Commercial Glass & Aluminum Co, said that bringing in skilled overseas workers to help with major projects had spin-off benefits for his own staff. “Sometimes we have to bring people in for big projects, such as the airport,” he said. “It’s important to bring that expertise, but our guys learnt a lot from it — that’s important as well.”

Mr Barber added that large projects like the Fairmont overhaul had a beneficial ripple effect throughout the industry, even for those companies who did not win contracts.

“If one of our competitors gets a big project, we seem to get more of the smaller projects,” he said.

“In 2021, we had our best year for sales. Even though we had nothing to do with Point Place, we ended up with higher sales, because we had a greater market share of the other work.”

Other hospitality developments are also in the pipeline. The redevelopment of Ariel Sands, which will include a 33-room hotel, 21 villas and a 30-unit condominium building, was given the green light by planning authorities in May last year. Pre-construction activity is already taking place, Mr DeCouto said. And at the Nautilus Hotel Residences in Warwick, 12 units are under construction.

Mr DeCouto said there was no shortage of other hospitality properties to develop and plenty of political will, but there were economic obstacles.

“The larger projects are competing for developer interest and funding with other international projects in places like Cayman, the Turks & Caicos and Mexico, and those locations have much lower acquisition, construction and operating costs than Bermuda,” Mr DeCouto said.

“Why come to Bermuda to bet $100 million for a risky chance to make 5 per cent, when you can go to Mexico and make 20 per cent? Bermuda is very lucky to have committed developers like the Greens and Gencom who have invested very heavily and are very committed to Bermuda.”

On the residential side, there is also a clear need for development. Mr Burt said in his Budget Statement that Bermuda had an “acute housing shortage” — and the Government’s desire to see the working population grow by more than 8,000 over the next five years will only exacerbate it.

The repossessed Morgan’s Point site in Southampton, where the Government plans to build 101 residential units, as well as commercial spaces for stores and restaurants, may be part of the solution. The plan was welcomed by Mr DeCouto, who said: “It complements the strategy of increasing the working population by adding to the housing stock.”

The Government has also committed $15 million over the next three years to build new affordable housing units, while Mr Burt also opened new possibilities for developers by announcing plans to expand the eligibility for approved residential schemes from solely the Economic Empowerment Zones to the entire City of Hamilton. An added incentive for investors is that units in Hamilton will be available for purchase by “residents, businesses and international persons”.

Budgeted government capital spending in 2023-24 has been increased to $96 million with an eye on shoring up Bermuda’s creaking infrastructure. David Burch, the Minister of Public Works, has previously spoken of the need to replace the Longbird Bridge and Swing Bridge.

Infrastructure development, Mr DeCouto said, is “painfully necessary — the state of our roads, bridges, retaining walls, etc. is very poor in some locations”.

On the commercial property side, both Mr DeCouto and Mr Barber are aware of the potential redevelopment of a site on Front Street. While there remains a glut of office space available in Hamilton, prime waterfront offices are much in demand, realtors have reported.

It is clear that there is much building work to be done. If funding, planning permission and the will of developers come together, 2023 could turn out to be a landmark year for Bermuda’s construction industry.

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