Bermuda: One step ahead of the game
By Sean Moran, Bermuda Business Development Agency – This year promises to be a big one for Bermuda as we push forward on several strategies to make our market even more attractive and competitive for asset managers and allocators. In doing so, we aim to balance our goals as a jurisdiction with the many geopolitical and regulatory issues taking shape in 2018, including US tax reform, Brexit, and numerous global compliance initiatives.
Yet, these are the types of challenges Bermuda has always thrived on dealing with—and by doing so, has set itself apart from other financial centres. The spirit of innovation that has long been a hallmark of our international business community, as well as the optimism and creativity of our industry leaders, stand us in good stead to weather this current confluence of events.
Bermuda continues to be the example of what a well-regulated, modern financial centre committed to reliability and longevity looks like. In 2017, we became the first UK Overseas Territory to sign Country-by-Country Competent Authority Agreements with both the United Kingdom and United States. The agreements comply with Base Erosion and Profit Shifting (BEPS) tax-transparency standards set by the Organisation for Economic Cooperation and Development (OECD). France awarded Bermuda white-list status fulfilment of Country-by-Country reporting obligations. Bermuda was also declared “largely compliant” by the OECD Global Forum rating. Our AML/ATF assessment by the Caribbean Financial Action Task Force (CFATF) in 2018 will give us another chance to prove the robustness of our regime and build credibility with global regulatory bodies.
Open for business
The continued focus on compliance cannot come at the expense of being business-friendly, however; we must keep delivering quality service to satisfy the commercial needs of our customers and stakeholders.
The CFATF assessment has given our financial regulator, the Bermuda Monetary Authority (BMA), the opportunity to improve efficiencies in its authorisation and ongoing supervisory processes. The BMA will also streamline some of the rules for insurance-linked securities (ILS) funds to allow them Class A Exempt status—featuring same-day registration— if certain requirements are met.
Besides the Class A Exempt, there is an array of fund categories to meet various needs, as well as a suite of structuring options, from the standard limited company (LTD) to the limited liability company (LLC) to the segregated account company (SAC), that has proven very popular due to its flexibility and cost-effectiveness. Our legal professionals will work with you to agree the optimal fund type and structure to fit your needs.
Speaking of professionals, the pool of talent in Bermuda continues to expand. The arrival of new international law firms and fund administrators into the Bermuda market over the past year has created a more competitive environment where customers are spoiled for choice, and where those firms need to be on top of their game to win business. Providers of outsourced compliance and reporting services are also increasing their headcount to meet client demand for greater support in these areas.
At the BDA, our Business Concierge Service is available to assist asset managers and fund operators to set up smoothly and quickly in our jurisdiction. Providing access to the regulator and government officials, expedited company registration, and introductions to any local service providers you may require, our goal is to make it easy for you to launch your business from Bermuda.
Given Bermuda’s status as one of the leading reinsurance markets in the world, it’s no surprise we continue to be a dominant player in the ILS space. The majority of funds being registered and launched in Bermuda are situated on the broadening spectrum of alternative risk transfer, where the insurance and capital markets intersect. With creative deal origination, expert underwriting, innovative legal structuring and specialised back-office servicing all happening in one jurisdiction, it’s no wonder most asset managers choose Bermuda as the domicile for their ILS products.
But don’t forget that Bermuda first made its name in the funds industry many years ago, with the incorporation of the early Steinhardt hedge funds in the 1970s. In the decades that followed, our asset management professionals have adapted to the many flavours of alternative investment styles and asset classes, including private equity, fund-of-funds and hybrid vehicles that require outside-the-box comprehension and a deft servicing approach. Bermuda is certainly a location where these more complex or customised funds can be properly understood, established and administered.
High-net-worth individuals and family offices represent another interesting segment that is driving growth in new fund business. Originating from our very significant and successful trust and private client industry, wealthy individuals and families are increasingly focused on investing in assets and ventures that have a social, environmental or charitable objective. This impact investing can take many forms, but when facilitated through a tax-neutral Bermuda fund or company structure, it can optimise the investors’ returns while still achieving their philanthropic goals. Profit with a purpose.
The fintech revolution
The Bermuda government has committed to making Bermuda a leader in financial technology innovation and adoption. In late 2017, Premier David Burt and a working group comprised of local and international experts embarked on a mission to provide a legal and regulatory framework, and a fit-for-purpose ecosystem, for businesses offering innovative, financial products and services enabled by distributed ledger, or blockchain, technology.
In early 2018, legislation was passed governing initial coin/token offerings (ICOs) from Bermuda, and a raft of new regulation related to virtual currencies and digital asset exchanges is being rolled out before year-end. The move to embrace this rapidly evolving industry is viewed as critical if Bermuda is to remain progressive and relevant in the economy of the future – a future where blockchain technologies and the digitisation of assets are part of everyday business.
The fintech-related laws and regulations, in tandem with Bermuda’s new Personal Information Protection Act (PIPA), ensure our jurisdiction offers the safest possible environment for today’s and tomorrow’s data-driven businesses.
From an asset management perspective, cryptocurrency investment funds will certainly be an asset class in which we expect to see growth. And with Bermuda setting the standard by being the first jurisdiction to regulate such activities, it is not inconceivable we could soon be as synonymous with fintech as we are with insurance.