If the early 1970's saw the expansion of captives, the early 2000's will see the explosion of e-insurance in the offshore markets.
Bermuda's place in the history of captives is assured, yet back then we all thought we had a lot of work to do to persuade the corporate risk manager to set up his or her offshore captive. Not only the jurisdictional issues of why Bermuda, but why offshore at all..?? However the truth, with excellent hindsight of course, is that Bermuda, at that time was the only game in town. So not only did the captive flourish, but Bermuda as a captive centre did so as well.
Then as the 1980's came along, the new type of insurance company, the excess and finite carriers, evolved. Their birth was a direct reflection on the quality of the infrastructure, reputation and brand image of Bermuda at that time. Then as the 1990's purred along, the big cats roared into action. Again, based on labour availability, support services and of course established markets on the doorstep.
So by the time this three-tiered market structure had evolved (captive ; excess/finite ; cat) plus sophisticated brokerage facilities, it was evident that Bermuda had in fact clearly answered the why Bermuda, why offshore questions quite adequately.
However, as we look forwards, it is perhaps a good opportunity to glance backwards to pick up a few points on the marketing and promotion of the offshore markets phenomena to perhaps help us as we enter the new e-world of business.
Back then, offshore insurance was new to the business world and whilst it had its advocates and followers it was a gospel message which required many podiums to shout it from. The whole idea of offshore business was new to most people and especially to those who had grown up in the internal taxation cultures of the business nations of the world. Was there something dark and mysterious about doing business offshore or was it just for those who had no hesitation about seeking to avoid taxes..? Hence the notion of cross-border activity was alien to all but the most sophisticated tax specialist.
Not so today. The e-world is known by many, in many places, in many walks of life - from classrooms to living rooms to boardrooms, around the world. Cross-border activity is the very core of the e-world. So no matter how many podiums we think we need to spread the word, if we are sticking to the old methods of promotion, we will run out of time. Hence the concern is that not will we get it wrong, but that we will get it right too late.
Conservatively, in the mid-70's to mid-80's, Bermuda had a 10-year jump on its competitors in the insurance game. Moreover, it had the propensity to spend lavishly on conventions, dinners and so forth, which in those days of colonial splendour, was the protocol. Today, Bermuda does not have any competitive jump in the e-world, but it does tend to still throw a good party based on the argument that old-style gospel meetings with the audience largely being converts in the first place will do the trick. Too bad.
New ideas, speed to market, breaking traditional structures, seeking best-of-breed alliances, converting "old-think" to "new-think" - rapidly - will all be needed to assure Bermuda of its natural next step in the new e-insurance world of the new millennium.
High-speed data transmission capacity, such as being introduced by Bermuda-based TeleBermuda International, gives the Bermuda insurance market the optimum chance to build on its pristine name. When added to state-of-the-art applications in such areas as fast large file transfers, video imagery, encryption, solid security, point and click web browser simplicity, offline storage and disaster recovery centers, the insurance and reinsurance world of Bermuda will change dramatically.
The development of global e-insurance thus far had largely been focused on consumer insurance (i.e. the business-to-consumer of "B2C" markets). Traditionally this market has eluded Bermuda, mainly due to the regulatory environment of the U.S. (the admitted status rules). Regardless of technology, it is difficult to imagine the U.S. consumer buying his or her homeowners policy online from a Bermuda company - but what will stop the Latin American in Brazil for example, buying such a policy from a bona fide insurance company based in Bermuda online..? Or the international expatriate buying a life insurance policy online - the advantage of regulation and tax efficiency being attractive to the carrier.
Through the development of telecommunications and business ties between Bermuda and Latin America it is highly possible that Bermuda can become the domicile of choice for the provision of insurance products to the burgeoning markets to our south. Based on the varying regulatory jurisdictions of the Caribbean and Latin America it is conceivable that Bermuda's "anchor tenant" status in the offshore insurance world will be of interest to corporations and individuals in Latin America and to corporations/insurance companies doing business in Latin America from the European markets for example. Add to that Bermuda's central location between North and South America and Europe, bolstered by a strong telecommunications platform. - the digital crossroads of the major trading blocks in the world. Voila.
Therefore if the insurance infrastructure of Bermuda is in place and the telecommunications infrastructure of Bermuda is in place and the "good housekeeping seal of approval" of Bermuda is in place, then what are the magic ingredients needed to bring it all together quickly?.?
Innovative management, marketing and promotion in an e-culture.
The web entrepreneur learns quickly that merely having page hits is woefully inadequate when assessing an e-business strategy. Interactive marketing in an online world is the new so-called paradigm. Less than 3 years ago the thought that a website, supported by a co-ordinated marketing strategy would generate the bulk of a company's sales - online or not - was tantamount to being classified as a "geek". Nowadays, the online promotional campaign has superceded the design, print and mail brochure after brochure mentality. The savvy netpreneur knows that with quality online promotion the chances of better qualified leads in a shorter time-frame is not only realisable, but cheaper in the long run. Might be the reason why some 64 new millionaires are created every single day in Silicon Valley. Putting good money on a horse just because it is older, wiser and has four legs may be a good bet in the short run, but it won't cross the line first - not nowadays.
The business-to-business ("B2B") environment of the offshore insurance world is the key to the future success of Bermuda. Bermuda has relied on its Fortune 1000 culture - that will continue, however many stray leads will be pursued seeking the new offshore Microsoft. It might happen of course, but Bermuda will benefit from the old country song "Do what you do do well, boy". There is no need to re-invent the business wheel, just turn it with electron power rather than horse power.
Innovative e-business moves are occurring each day and they must be applauded, especially if a solid business case surrounds them. A recent development by one legal firm in Bermuda has seen the introduction of online incorporations. While this is certainly a bold move, this author at least, is not yet totally convinced of its real value-add. It seems that the innovation is more required in the development of appropriate e-business models, supported by well-drafted e-business plans.
It might be more beneficial to the industry to spend time and money developing such things as rent-a-captive models using existing insurers where the addition of one more programme of insurance can be easily accommodated in an online facility. Support that with online management reports, financial statements, investment reports all within an online secure "cell" with access only by the rent-a-captive company and the programme principals. This would easily dovetail to the new protected cell legislation of Bermuda.
So the new e-Bermuda insurance market will require a myriad of technical and business-driven professionals, each playing their own part in the bigger picture through non-exclusive working relationships, alliances, mergers or takeovers.
The traditional captive management company will be forced into taking a fresh approach to its IT functions. Up until now, the IT function has been seen as a support function of the core management function in the same way as has the human resource function. That will change. Innovative IT executives, with an understanding of insurance (and of course supported by their underwriting and financial colleagues) will devise new ideas by the truckload for new e-insurance models across the full spectrum of insurance - property and casualty and life. So, unlike in the past, where the IT person has been seen as the "guy in the basement" he will get every opportunity to become the guy in the penthouse.
We will also see new resident, but non-traditional, management operations being born. Today's business world is thriving on traditional structures being turned on their head. So we will soon see the small technology-driven company, essentially in business to provide technical solutions, realising that it can buy-in the talent of an insurance underwriter or captive management accountant and deploy them within a technology-based service to their clients. Clients will pay good money to hear the technologist talk about the integration of underwriting, accounting and investments on a server-based structure with secure channeling, browser-enabled and worldwide accessibility rather than the accountant trying to explain GAAP in the new e-world. Simple really.
The long-standing national assets of Bermuda Business - innovation, private and public sector co-ordination, quality screening and client servicing - will all serve as the platform for the new e-insurance generation. There is no question that success breeds success and the success of Bermuda's captive management, brokerage, insurance and reinsurance companies, have all generated vast sums of capital, which, when applied to technological solutions, will provide the springboard for Bermuda to prosper in the 2000's as it has done in the last three decades so successfully.