Philly's Bermuda ties: How a tax and legal haven copes with Trump, tech

Among the 10,000-plus insurance people — and a few celebrities (actor Michael J. Fox, World Bank CFO Joaquim Levy) — filling Center City hotels, party venues such as the Franklin Institute, and the Pennsylvania Convention Center this week for the Risk Management Society's yearly RIMS conference, the only guest who heads a government stands out:

He's wearing shorts.

"Bermuda shorts. They're comfortable. Very stylish," cracked the Honorable Michael H. Dunkley, premier of Bermuda, the self-governing British colony whose 65,000 people live on green sandy islands 660 miles off North Carolina. Long shorts are office wear in humid Hamilton, the capital, though Dunkley dressed more formally for his keynote speech Monday.

Since the 1980s hurricanes that nearly wiped out U.S. insurance reserves — and through the more recent disasters of Sept. 11, 2001; Katrina; and Sandy —  Bermuda has developed as a tax and legal haven and a marketplace for the global reinsurance business. Such big insurers as Chubb — a major Center City employer with roots in Philadelphia's Insurance Co. of North America and Bermuda's Ace Ltd. — cut deals there with foreign counterparts and investors to share risk and pay giant claims in an orderly way.

Bermuda is also a global investment center, home to overseas offices of the BlackRock and Fidelity investment groups. Indeed, since revolutionary times, when islanders let George Washington's forces take gunpowder in exchange for food, Bermuda has sought to profit from its location between the U.K. and the U.S.

Bermuda taxes land, labor, imports, and services — not corporate profits. Won't its edge be vulnerable if Republicans make good on promises to cut U.S. tax rates?

It's not just about taxes, said the premier's travel companion, Bermuda Minister of Economic Development E. Grant Gibbons.  "We have intellectual capital. Underwriters, accountants, and lawyers make Bermuda attractive." Plus,  legislators are flexible and accommodating.

"What the U.S. exports to Bermuda is risk. And we send you capital," Gibbons added, which means competition, and lower premiums for U.S. insurance consumers. 

How do Bermudians expect their U.S. risk trade will fare, given President Trump's claim to value each trade relationship not on fairness, but on whether the U.S. dominates the exchange? "We are very comfortable explaining the benefit to America," Gibbons told me. "We believe we have real value to offer to the Trump administration."

The Bermudians enjoyed a captive audience in Philadelphia. RIMS is the biggest show to hit town this year, Eric Evjen, research director at the Philadelphia Convention and Visitors Bureau, told me. The group estimates that companies and visitors will spend $1,400 per attendee, including on hotels, meals and party venues such as the Moshulu and the Franklin Institute.  

In racially mixed Bermuda, the premier is appointed, typically from the island's elected House of Assembly, by its British governor and scrutinized. Dunkley's predecessor resigned after questions about a free jet ride from a Maryland developer.

Dunkley's party, the One Bermuda Alliance, has welcomed the legal, accounting and insurance business that, with 3,700 workers, has overtaken tourism as a major employer. It has lately faced protests from the rival Progressive Labour Party over immigration and airport expansion.

"In small places, you can't get away from politics," the premier said. "We'll have our disagreements. But we realize the world watches you. Bermuda has a reputation for being a first-class jurisdiction. This [contributes to] a high-quality standard of living in a safe place." No party wants to ruin that, he insisted.

The pitch recalls what I've heard from other high-class tax havens: the Cayman Islands, Delaware. "We copied Delaware's limited-liability company legislation last year," Dunkley said, nodding. "It works well with our Ltd. companies" as a way to segregate loss risks for coverages managed by a single insurer.

Won't online connections wipe out the benefit of concentrating experts in places such as Hamilton? "We are comfortable that fintech industries are starting in Bermuda because of our underwriting strength and capacity for professional services," Gibbons told me.

"We're small. We have to be nimble. And effective."