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.”

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Business travel to Bermuda is nowhere near pre-pandemic levels but it is bouncing back — and the reopening of the Fairmont Southampton will help hugely with the rebound.

That’s the view of Stephen Todd, chief executive officer of Bermuda Hotel Association, who said the island would benefit from having the landmark Southampton hotel back.

“Clearly, I think we are all waiting with bated breath for the eventual reopening of the Fairmont Southampton, because that’s going to give us our largest meeting venue,” he said.

“From a standpoint of business travel, we believe that’s going to see a re-emergence of larger groups seeking to meet, as they previously did, prior to the pandemic.

“We’re seeing the interest on the part of business travel.”

Mr Todd described Bermuda as being still in the “throes of post-pandemic recovery” but with some encouraging signs.

Bermuda Tourism Authority figures show there were 32,768 air visitors who came for business in 2023, compared to 47,285 in 2019. Business visitors saw the largest growth in 2023, up 42.4 per cent year-on-year.

Mr Todd said business travel would be a “key component” in the recovery of the island’s tourism industry, with an emphasis right now on attracting small to medium-sized corporate events.

“That’s been demonstrated most recently by the Business Development Agency and their conference [Bermuda Risk Summit] at the Hamilton Princess,” he said.

“We’re positioning ourselves to meet that re-emergence of business travel and group meetings. We’re getting the message out that we’re open for business.”

He added: “We’re not going to try to sell something that we can’t support. We may not be able to entertain an event for 400 to 600 people but we may be able to handle 350 to 400.”

At the height of the pandemic, many wondered if corporate travel would ever return to normal levels, with companies realising the cost savings that video-conferencing technology could bring.

But Mr Todd said: “That’s not proving to be the current status at all.” There was nothing quite like meeting clients and colleagues in person, he added.

“As much as technology is advantageous, it’s also impersonal,” he said, adding that an in-person event lent itself to many more opportunities for interaction.

“Having that social interaction and the ability to, for want of a better term, press the flesh, this technology doesn’t provide us with that upfront, personal interaction.”

Mr Todd noted a post-pandemic trend of business visitors adding additional non-work days to their trip, something the Hamilton Princess has noticed too.

A hotel spokeswoman said: “As experienced globally, a business traveller may add on extra days for leisure, joined by a partner and other family members.”

She said the Hamilton Princess’s business clientele profile had “always remained constant” and the hotel was now seeing the “return of the corporate group traveller, attending groups and conferences”.

Business analysts have suggested the high number of people who relocated after the pandemic means many executives now need to travel to meet colleagues within their own companies.

The Hamilton Princess spokeswoman said the hotel had experienced an increase in requests for meeting spaces geared towards board meetings. It has responded to demand with a new executive meeting suite floor, consisting of four boardrooms, including the Tea Rose and Tea Rose terrace, with views over Hamilton Harbour.

Mr Todd said increased airlift to Bermuda from several US cities from April would provide another boost for business travel.

“We are going to prove to be far more attractive,” he said. “We are in very close proximity to the US eastern seaboard.

“That, to me, is an incentive for groups that want the ease and convenience of getting here. We are talking as short as 90 minutes and perhaps no more than three hours, depending on where you are originating.

“In a couple of hours, you could be walking along a beach, or having a swim, or playing pickleball.”

He said it was heartening to see ground being broken on the multimillion-dollar renovation of the Fairmont Southampton in February, when owner Westend Properties indicated it should be ready to welcome guests before the end of 2025.

Mr Todd said Bermuda’s marketing should focus on the quality on offer here.

“If we can provide a brand experience, whether it’s a local or international brand, then the price is not the issue. It’s really whether we’ve given value for money.”

The post Business travel shows signs of bouncing back appeared first on RG Magazines.

It’s not just the business opportunities that have tempted affluent individuals into investing in Bermuda’s economy over the past three years.

The chance to live the dream on a paradise island is also playing a major part in the success of the Government’s Economy Investment Residential Certificates initiative, which gives residency rights to people who invest at least $2.5 million in Bermuda.

A total of 49 applications have been approved since 2021, according to the Bermuda Business Development Agency, equating to a total investment of $464 million in local businesses and real estate.

Those certificate-holders are required to spend at least 90 days on the island each year and have brought their families with them – meaning an extra 123 residents are now enjoying life in the middle of the Atlantic.

“Many of the applicants tell a similar story,” Kyle Rogers, research and intelligence manager at the BDA, said.

“They have travelled here regularly from a young age or have experienced a significant life event here and love the idea of being able to live here long term.

“Other applicants invest here because Bermuda is just a great place to do business. This includes the expertise of the quality service providers located here, our advantageous geographical location and sophisticated island lifestyle.”

Mr Rogers said EIRCs have proved most popular with high-net-worth individuals from the US, the UK and Canada – although people from Spain have invested the largest amount in total.

A breakdown of the figures shows $212 million has been invested in new businesses, $203 million in real estate and $49 million in existing businesses.

Twelve new applications were approved in the past nine months, representing about $40 million of new investment in real estate. Realtors say the programme has helped boost demand for luxury homes, a sector in which finding buyers can sometimes be a relatively slow process.

Mr Rogers said: “We continue to see strong levels of interest for new applications.

“We remain extremely optimistic about the long-term potential of the EIRC initiative and are proud of the role we have played thus far in creating economic growth.

“Bermuda has always been an exceptional place to live and do business. Since 2021, EIRC has provided high-net-worth individuals, and their families, with an opportunity to live here to see their investment prospects realised.”

Individuals can qualify for an EIRC by investing $2.5 million in:

• Residential or commercial real estate
• New Bermuda-based business or existing business excluding exempted undertakings
• Bermuda Government bonds, Bermuda’s Sinking Fund or the Bermuda Trust Fund
• A Bermudian-registered charity
• Any social or practical venture that benefits the island as determined by the Minister of Economy and Labour.

Clients interested in applying for an EIRC certificate must submit a set of documents to help the BDA vet their identities, their sources of wealth and their sources of funds.

The vetting process also looks at the applicants’ originating country to identify anyone applying from high-risk countries with known Anti-Money Laundering and Counter Terrorist Financing deficiencies.

Once all the necessary documents have been received, the completed application is submitted to the Ministry of Economy and Labour for review and approval, at which point the investor receives immediate residency rights.

Jason Hayward, the Minister of Economy and Labour, has said the Government launched the programme because it wanted to harness immigration as a tool for economic growth.

Mr Hayward has said individuals tend to invest much more than the minimum $2.5 million. The average investment per certificate works out at more than $9 million.

The Government believes affluent individuals appreciate Bermuda’s well-regulated business environment and that the programme’s success highlights global confidence in the island. This year, Bermuda added EIRC to its National Risk Assessment against AML and CTF.

The EIRC application process is confidential and anyone who wants to start should visit bda.bm/economic-investment-residential-certificate.

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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.

While only the employee’s share of the tax was increased for anyone earning more than $136,000, the employer’s share was either reduced or left unchanged. David Burt, the Premier and finance minister, said correctly that no business would face a greater payroll tax liability as result of the changes that kicked in on April 1. However, in practice many international companies will end up seeing their employment costs rise.

Given that international businesses generally pay all or most of the employee’s share of payroll tax — and the sector includes many high-earning, specialist roles — the changes could have a significant impact.

Chris Schaper, chief executive officer of AIG Bermuda and deputy chairman of the Association of Bermuda Insurers and Reinsurers, warned at the Chamber of Commerce Budget Breakfast that the changes would raise significantly increase employment costs.

“I wanted to just be clear that for ABIR companies this is an important aspect of how we think about our overall costs,” Mr Schaper told The Royal Gazette after the event. “And some of those changes can drive decisions.”

Those “decisions” Mr Schaper referred to are likely to include whether the jobs located in Bermuda actually need to be here and which can be transferred into other lower-cost locations, said one source, an experienced business services provider, who asked not to be named.

He said: “Twenty-five years ago, every international business employer would pay the employee’s share of everything — payroll tax, health insurance and social insurance.

“Some companies still pick up everything, but now that things have become much more expensive, that is starting to change. It’s becoming more common to see them asking the employee to pay 2 per cent or 5 per cent.”

Employee payroll tax rates for the income band from zero to $48,000 fell 1 percentage point to 0.5 per cent. For the band between $48,000 and $96,000, the rate increased 0.25 of a point to 9.25 per cent.

For the restructured higher bands, the rates are for $96,000 to $200,000, 10 per cent; from $200,000 to $500,000, 11.5 per cent; and from $500,000 to $1 million, 12.5 per cent.

The employer’s share for exempted companies remained at 10.25 per cent, while for other business classes the rates were reduced.

So what does this mean in practice?

For local companies, who generally pay only the employer’s portion of benefits, the changes mean a fall in the cost of employment. But for international companies footing the bill for the employees’ share as well, the opposite is true.

With the help of a spreadsheet supplied by a payroll worker in IB, who asked not be named, we were able to calculate how this year’s tax regime would change the cost of employing executives compared to last year at different salary levels.

These calculations assume the employee is a single person with a second-tier health insurance plan from one of the local insurers, that no other costs changed from last year, and that the IB employer is paying the employee’s share of all benefits (payroll tax, pension, health insurance and social insurance). No other benefits are included.

• An employee with a $500,000 salary would have cost the employer a total of $665,556 in 2022-23, rising to $673,388 in 2023-24, an increase of 1.2 per cent. Payroll taxes for this employee will increase by $7,832, or 8 per cent, to $104,901.
• An employee with a $750,000 salary would have cost the employer a total of $992,400 in 2022-23, rising to $1,008,107 in 2023-24, an increase of 1.6 per cent. The payroll tax element of this will increase $15,707, or 10.6 per cent, to $163,339.
• An employee with a $1 million salary would have cost the employer a total of $1,304,274 in 2022-23, rising to $1,335,629 in 2023-24, an increase of 2.4 per cent. Payroll taxes paid for this employee will increase by $31,355, or 17.1 per cent, to $214,580.

These employment costs will often be higher still, because an executive may have a number of dependents on their health insurance plan, or they may be receiving a housing allowance.

The uncomfortable reality, said our business services source, is that Bermuda is already one of the most expensive places on Earth to employ someone and every time that cost becomes higher, employers are likely to explore other options.

He added that this had been happening over the past two decades with the relocation of back-office staff and non-core functions, as well as some outsourcing. Executives have also relocated, taking entire teams with them. The advance of technology has added momentum to these trends.

“After the 9/11 terrorist attacks in 2001, a new wave of reinsurers set up in Bermuda and everybody who worked for those companies was based here — marketing, IT, financial, legal, underwriters,” the source said. “Now, insurers tend to have only the critical functions on island, typically the underwriting service.

“As technology has evolved, there has been another change. Ten or 15 years ago, people would leave the company and the island. Sometimes, now they may leave the island without leaving the company and continue to work remotely. Effectively, they take the job with them.”

Outsourcing has also become more popular, particularly for back-office and finance functions. A company could shave between a half and two-thirds off the cost of employing a lower-level, non-qualified accountant by outsourcing to lower-cost jurisdiction, the source said, making it difficult to justify locating such roles in Bermuda.

He added that he knew of two Bermuda insurers considering a move to Cayman, where there is a scaled fee structure for work permits as an alternative to payroll tax.

How the looming global minimum tax may influence Bermuda’s taxation landscape and the resulting impact on employment costs remain to be seen.

For now, if Bermuda wants international business jobs, it will need to stay on the right side of the cost-value equation: ensuring that the benefits of being in Bermuda outweigh the added cost of locating employees on island.

The post Payroll tax changes give IB leaders ‘decisions’ to make appeared first on RG Magazines.

The introduction of economic substance requirements in offshore jurisdictions has sharpened the impetus for investment fund managers to establish a physical office where their funds are incorporated. Here are six good reasons to choose Bermuda.

1. An established funds community

Bermuda is a significant centre for both traditional and alternative investments including funds, private equity and insurance-linked securities (ILS). Some highly respected names in the investment world – including Orbis, Fidelity International and Nephila Capital – have headquarters or offices in Bermuda, with investment professionals on the ground.

Bermuda receives high marks from international standard-setting agencies, such as the Financial Action Task Force (FATF) and the Organisation for Economic Cooperation and Development (OECD), compared to other offshore jurisdictions, confirming its standing as a well-respected international financial centre.

For alternative fund managers, especially those with “contrarian” approaches, being based in Bermuda allows a fresh perspective, away from the herd in New York and London.

2. A quick hop to major financial centres

While avoiding the big-city noise has its advantages, there are times when you just have to be there in person. Bermuda’s location just 650 miles off the U.S. east coast in the North Atlantic means New York is less than a two-hour flight away, and London is only six hours away. Other east coast cities in the US and Canada enjoy direct flights and easy connections for more far-flung destinations abound.

The island has a new, state-of-the-art international airport with a dedicated terminal for private jets.

3. First-class support and infrastructure

Bermuda is one of the longest-established offshore financial centres in the world and is known as the world’s “risk capital” due to its importance as a global hub for insurance/reinsurance business. Hamilton, the island’s capital city, is a centralised location for Bermuda’s intellectual capital, with abundant networking opportunities.

The island offers the support services that international businesses expect, including world-class international law firms and the Big Four accountancy firms. It has a sophisticated infrastructure with quality commercial office space (complete with water views) and very high speed 4G broadband internet. Regulatory approval has been granted for licensed telecom companies to roll out 5G broadband.

4. Expedited work visas

Bermuda has made it easier for executives who are able to support themselves from employment outside Bermuda to relocate to the island with a one-year Work from Bermuda Certificate. It costs $275 to apply. Certificate holders are regarded as residents and can rent home and office space locally. They will not pay income or capital gains tax in Bermuda. Salaries can be paid in US dollars, which are accepted in Bermuda as legal tender.

Those relocating on a more permanent basis to set up a new Bermuda entity can apply for a variety of work permits. Prior to establishing a business proper, a Global Entrepreneur Work Permit can be used to locate on island during the start-up phase. There are also New Business Work Permits, which may be granted in as little as ten working days. While most positions must be advertised locally before a work permit can be granted, this requirement is waived for New Business Work Permits and for C-Suite positions.

Resident owners and employees of Bermuda entities will pay payroll tax in Bermuda, although exemptions and/or payroll tax relief may be available in certain circumstances. For those investing significant amounts of capital in establishing in Bermuda, economic investment certificates and related residency certificates may be an option.

5. The Bermuda LLC

While adhering to the highest international standards, Bermuda is very business-friendly when it comes to company law and regulation. The jurisdiction offers a range of options for structuring offshore entities. One of the most recent is the Bermuda Limited Liability Company (LLC), a flexible offshore vehicle that can replicate many of the same features as a Bermuda exempted company, but with fewer corporate governance restrictions.

Closely modelled on Delaware LLCs, the structure will be familiar to many. Bermuda LLCs are ideal for complex financial structures, such as private equity vehicles. Just like a Bermuda company, a Bermuda LLC can be formed with relative ease, and government fees for LLCs are set competitively at less than half the fee for an exempted company.

6. Trusted judiciary

Bermuda is a British Overseas Territory and has a legal system based on English law with independent courts. The highest court of appeal is the UK Privy Council. Investors can have a high degree of confidence in fair, impartial and transparent legal decisions.

While the introduction of economic substance requirements across all offshore jurisdictions may be an additional burden for those using tax-efficient structures, we would encourage fund managers to consider the benefits of using Bermuda as a jurisdiction for centralising their offshore activities. Such a strategy allows managers to maintain a neutral tax treatment and facilitates compliance with offshore economic substance requirements, all while enjoying the island’s high standard of living and international connectivity.

Edward Rance and Robert N Alexander are directors in the Corporate department of Conyers in Bermuda

The post Six reasons why Bermuda is a good choice for fund managers appeared first on RG Magazines.

Last year Hurricane Ian caused devastation in Florida, for which insurers were on the hook for an estimated $50 billion-plus, piling on more pain for ILS investors. Michael Millette, co-founder and managing partner at ILS fund manager Hudson Structured Capital Management, has spoken of “fatigue” among investors.

However, just as Bermuda’s traditional re/insurance market has diversified beyond the property-catastrophe coverage for which it is best known into many casualty and specialty lines, industry innovators are finding new risk areas for ILS.

Julian Henderson, chief commercial officer of Vesttoo, a global risk transfer platform, said at the Bermuda Risk Summit in March that non-cat business currently represents only around 15 per cent of the $100 billion ILS market, a figure she expects to double inside the next two years.

With Bermuda the epicentre of the ILS industry and a major source of capacity for the island’s traditional re/insurers, the future for ILS matters for Bermuda.

Kathleen Faries, CEO of Artex Capital Solutions, a company that creates and manages structures that connect capital to risk, offered her perspective.

Navigate: How is investor appetite for ILS standing up after several years of relatively high catastrophe losses and some instances of trapped capital?

Faries: Investors that have been in the asset class for the last six to ten years have experienced a wide range of losses across multiple property cat perils including wildfire, hurricanes, flooding, earthquakes and windstorms.  As ILS is still a relatively “new” asset class, it means that these investors are now much more sophisticated and educated regarding the asset class and the industry.

For some, the losses, coupled with climate change uncertainty, has meant they are taking a much harder look at the way risk is priced and modelled and ultimately looking to be sure they are getting paid for the risk they are assuming.

Some have looked at where they are investing across the asset class and reallocated to portfolios that are taking less modelled risk, or have negotiated tighter terms and conditions to take out some of the uncertainty and/or what we refer to as secondary perils that can be more difficult to model.

Lastly, there has been a push by many to move the industry overall to a more profitable and sustainable pricing and return environment.

Navigate: ILS are best known for property-catastrophe risk solutions, but the types of risk they cover appear to be expanding. In which non-cat areas do you see the greatest opportunities for ILS growth?

Faries: We are facing some extremely large and dynamic risks globally.   A good example is cyber.  If you believe some of the predictions on economic losses and damage to business as a result of cyber incidents/attacks, we are facing numbers in the range of $10 trillion globally by 2025.  It is clear that the traditional reinsurance market alone cannot come anywhere near providing enough capacity to manage this risk.

This is where capital markets could play a critical role if we can develop cyber structures, pricing and modelling that will get more investors comfortable with this risk.  We are definitely seeing movement in this direction but it is still early days and more work needs to be done.

Specialty and casualty are also of interest recently with several new start-ups focused on bring these risks to investors in a more meaningful way and size.

Navigate: Do you think Bermuda will continue its leadership position in ILS? Is the competition from other jurisdictions heating up?

Faries: Bermuda remains the leading jurisdiction for ILS.  The intellectual capital that has been built up across risk takers, brokers, lawyers and service providers is unmatched globally.

Bermuda benefits if the industry can expand the asset class. Efforts such as the one that is currently happening in London to build a more efficient framework and process for capital to back Lloyd’s syndicates are important and necessary for the ILS market to remain relevant and to start to have a more meaningful impact on some of the non-property cat risks that are facing us, such as cyber and climate change.

Artex is doing its part to support this effort, as expanding the market that ILS investors have access to and are backing, will benefit the entire industry and society as a whole.

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