Features

Safe haven

1 Apr 2010 by AndrewGough

Millionaires’ playground Bermuda has reinvented itself as the world’s risk capital, says Sarah Gilbert

A string of coral islands almost a thousand kilometres off the east coast of the US might be an unlikely location for the world’s risk capital, but Bermuda is full of surprises. Less than 34km long and 10km wide, resting on the exposed tips of an extinct volcano in the middle of the Atlantic Ocean, “the Rock”, as it is affectionately known, has built itself into one of the world’s most prosperous economies.

It might all have been very different. Britain’s oldest colony was discovered by accident – in 1609, Admiral Sir George Somers and his crew were shipwrecked en route to Virginia and washed up on the shores of the uninhabited island. With virtually no natural resources or industry, it has traded for generations on its ingenuity – from blockade running during the American Civil War to rum running during Prohibition and intelligence gathering in the Second World War.

It’s also taken full advantage of its natural beauty. With miles of pristine coastline, a lush interior and a mild, sub-tropical climate – golf and spa from November to March, beach and sizzle the remainder of the year – it’s no wonder it became a millionaire’s paradise.

Tourism began in 1883 with the arrival of Queen Victoria’s daughter, Princess Louise. Socialites and celebrities followed and by the start of the 20th century it had become a playground for the fashionable elite – the Vanderbilts, Roosevelts and Rockefellers among them. They flew in by Pan Am Clipper. Now it’s roughly a seven-hour flight from London Gatwick with British Airways (daily from April to October and six days a week the rest of the year), or about two hours from New York with American Airlines and Jet Blue.

At first glance Bermuda retains a peculiarly British air, with red post boxes, afternoon teas and parishes named Southampton and Devonshire. But it’s very much its own country, a relaxed hybrid of American, British and West Indian influences, with a governor who represents Queen Elizabeth II as head of state, and a democratically elected premier who leads the government.

Today, the tourist trade has been eclipsed by the island’s international offshore finance industry – primarily insurance and reinsurance. More than 13,000 global firms have made it their nominal base and, despite the economic downturn, 42 insurers set up here last year, joining giants such as XL Capital and Aon Benfield, and the three largest insurance brokers, Aon, Marsh and Willis.

The capital, Hamilton, is the hub of business activity. Advertising and neon signs are banned, and the sugared almond-coloured Victorian buildings that line the harbour belie its financial powerhouse status. Being small and compact works in Bermuda’s favour. “Clients from the US, Europe, Asia and the Middle East like the fact that they can shop around for liability insurance from a variety of leading companies, all within a couple of square miles,” an English underwriter at XL says.

In November 2008, the G20 summit made fighting tax havens key to the bid to combat the financial crisis. While several multinationals have announced their intention to relocate their domicile to other financial centres, such as Ireland and Switzerland, the insurance industry is, in the main, standing by Bermuda. Last June, it was the first nation to move from the Organisation for Economic Co-operation and Development’s “grey list” to the “white list”, demonstrating its commitment to implementing the internationally agreed tax standard, and the island will host the OECD’s Tax Forum in 2011.

Paul Markey, chairman of Aon Benfield Bermuda, says: “Bermuda has worked diligently with the OECD since 2000 to play a leading role in developing a standard model for tax information exchange agreements [TIEAs] between countries.” As of February this year, Bermuda has 19 signed TIEAs, six more than required by the OECD standard, and is expecting to sign more in the near future. “The International Monetary Fund has also found Bermuda to be compliant with recognised international standards of financial regulations and transparency,” Markey adds.

With a population of just over 64,000, Bermuda has always relied on expats to boost the workforce – including British, Americans, Canadians, Portuguese from the Azores, and increasing numbers of Eastern Europeans. Expats get around the easily navigable island by car (restricted to one per household, with no hiring option), bus, ferry and moped.

Friday-night drinks are a long-standing tradition in Hamilton and it’s not unusual for workers to find themselves drinking alongside their CEOs. On Bermudiana Road – otherwise known as “Insurers’ Row” – Opus and LVs are glossy new favourites, as is Harry’s, a contemporary bar-cum-restaurant on the waterfront. Happy hour in the grounds of the Fairmont Hamilton Princess hotel is an institution.

Last April saw the opening of Tucker’s Point hotel and spa, Bermuda’s first five-star hotel in more than 35 years. Brian Young, its executive vice-president and general manager, says: “We offer an ideal setting for both business and individual travellers – our Bermudian style and proximity to the airport are sought after by both groups. This coming year, we estimate that about 40 per cent of our client base will come from individual business travellers and small corporate meetings.”

Billy Griffith, director of tourism, reports that other luxury hotel developments are under way, in spite of Bermuda’s strict planning laws. “We are looking forward to three further branded developments over the next few years, including a Park Hyatt resort in St George’s and a St Regis-branded property in Hamilton,” he says. The Park Hyatt is due to open in 2012 with 100 rooms, residences, four food and beverage outlets, a 1,300 sqm spa and fitness centre, two pools and almost 370 sqm of meeting space. The St Regis is expected to open the year after with 140 rooms, residences, two restaurants, a wine bar and spa.

While non-Bermudians are not allowed to purchase property, those with deep pockets can buy a small piece of paradise in the form of fractional ownership at Tucker’s Point, Newstead Belmont Hills resort and spa, which opened in April 2008, and the revamped Reefs hotel, which opened a new fractional wing late last year (the Park Hyatt will also have fractional units). “We introduced the concept to Bermuda in 2004 and it’s been held up as a model of success in the industry,” says Edward Trippe, president of Tucker’s Point Club. “To date, we’ve sold more than 80 per cent of our Residence Club units.”

Beyond happy hour and pink sandy beaches, the island offers a wealth of sporting activities. It is said to boast more golf courses per mile than anywhere in the world, and for the second year running will host the PGA Grand Slam in October. It was voted the best place to go wreck diving in the Caribbean and Atlantic region in Scuba Diving magazine’s 2010 Readers’ Choice Awards, and also has a thriving arts scene. It’s no wonder that Mark Twain said: “You can go to heaven if you want – I’ll stay here in Bermuda.”

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