Bermuda beckons

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     beckons                                                     T
                                                                       hese are uncertain times for the
                                                                       Bermudian re/insurance mar-
                                                                       ket, as it waits to see whether
                          The R&Q Group is raising its profile   the international community, and the
                                                                 US in particular, will take action on
                          in Bermuda following its acquisition   the tax treatment of offshore insur-
                                                                 ance. But while some companies may
                          of Quest Group. Paul Corver and        relocate or diversify their operations,
                                                                 Bermuda remains one of the major
                          David Taylor of R&Q told Derek         international insurance centres. And
     Paul Corver
                                                                 whichever way the wind blows, Ran-
                          Austin why the move to establish a     dall & Quilter Group has concluded
                                                                 there is business to be picked up of
                          base in Bermuda makes sense            one sort or another.
                                                                    Hence R&Q’s purchase of the Quest
                                                                 Group of companies in Bermuda last
                                                                 year. ‘The intention behind the acqui-
                                                                 sition of Quest, aside from getting into
     David Taylor
                                                                 captive management, was to gain a
                                                                 foothold on the island,’ explains Paul
                                                                 Corver, managing director, captive
                                                                 management services. (Although R&Q
                                                                 already has a Class 3 reinsurer* on the
                                                                 island it has not as yet written any
                                                                 business.) ‘At KMS, before we became
                                                                 part of R&Q, we looked at a couple of
                                                                 opportunities in Bermuda but did not
                                                                 succeed because we did not have a
                                                                 presence there.’ R&Q decided that in
                                                                 order to provide services in Bermuda
                                                                 it was important to be on the ground
                                                                 and have face to face contact with
                                                                 decision makers there.
                                                                    Quest is the fourth largest captive
                                                                 manager in Bermuda (by number of
                                                                 companies under management) and
                                                                 the second largest independent (ie.
                                                                 non-broker-owned). Captive manage-
                                                                 ment is a new venture for the R&Q
                                                                    ‘We are looking to grow the cap-
                                                                 tive management side of the business
                                                                 and perhaps extend it beyond Bermu-
                                                                 da,’ says Corver. ‘But it also gives us a
                                                                 base on the island to extend the R&Q
                                                                 suite of services – the run-off services,

28   run off & restructuring                                                       issue 29 · summer 2009

claims management services, reinsur-        business to be coming onto the market      There is a critical mass below which
ance services – to both the live and        within the island,’ he adds.               it is not beneficial for a company to
legacy sectors. We will use the Quest          ‘A lot of the money that has gone       create its own captive but if they can
offices and resources, and bolster          into Bermuda in recent years has been      slot it into a PCC, which carries much
those resources appropriately as the        into Cat reinsurers and now those          less overhead, it becomes a lot more
work develops.’                             reinsurers are looking to expand and       attractive.’
   David Taylor, newly appointed as         diversify across other classes and we         But how well will Quest’s captive
R&Q’s business development manager,         have seen a big influx into Lloyd’s. We    management business sit alongside
Bermuda, is now based on the island         have seen a number of Lloyd’s agen-        R&Q/Cavell’s traditional service busi-
and heads up the drive to introduce         cies redomicile into Bermuda, and          ness? ‘From what I have seen there
businesses there to the R&Q name            then diversifying the other way.’          is an excellent synergy,’ says Taylor.
and the range of services it offers. In        He also says some major reinsurers      ‘Some of Quest’s existing clients are
doing so he will draw on the network        on the island are stating that they wish   already expressing a desire, now they
of connections that the Quest staff         to go back to basics, and so may want      know Quest is part of a larger group,
already have among the re/insurance         to dispose of some of the distressed       for some of the services that can be
community in Bermuda.                       portfolios that may be on their books      offered.’
   ‘I will be contacting the key people     in order to assist with cashflow.             ‘We would be able to offer more of
at the key companies over the first few        Corver also sees scope for expan-       a bundled service to the client, rather
months, to make sure that people are        sion on the captive management side:       than the basic accounting and regu-
aware of our presence on the island,        ‘There seem to be indications that         latory process,’ adds Corver. ‘If it’s a
that we are there as a service option,’     captives are coming back into vogue.       captive underwriting third party busi-
says Taylor. The main target market         When you have periods of harden-           ness (Class 3) we can do claims man-
will be reinsurance companies and           ing rates, captives become a favour-       agement, reinsurance collections, and
the services offered will include audits    able vehicle for companies that have a     commutation and exit solutions. This
and inspections and the acquisition of      good loss record and don’t want to be      is a suite of products that are not nec-
distressed reinsurance debt, as well as     paying out premiums to an insurance        essarily normally carried by a cap-
management or acquisition of existing       company; if they set up a captive they     tive manager which is predominantly
or new run-off portfolios.                  can keep them on their own group           there to do the accounting and regula-
   ‘We are certainly aware that the gen-    balance sheet.                             tory function.’
eral climate of pursuit of offshore dom-       ‘The questions are now where those         For R&Q, being in Bermuda com-
iciles by the US and Europe creates         captive creations will occur,’ he con-     pletes the ‘insurance triangle’ of the
uncertainty as to whether Bermuda           tinues. ‘Bermuda has always been a         US, Bermuda and Europe. ‘Having
will maintain its status as a key place     strong player as has Cayman Islands        the foothold in Bermuda completes
to undertake reinsurance,’ says Corver.     offshore, Vermont is a very significant    our presence in that triangle,’ explains
‘We want to be positioned so that, if       player onshore. It will come down to       Corver. ‘There is so much interplay
companies feel that they may be better      the determination of the US compa-         between those three major business
off domiciled elsewhere and perhaps         nies whether they feel that things are     areas. We are now able to facilitate
want to shut down a Bermuda opera-          going to change, will there be a more      and cross sell services across the three
tion, then we will be able to take that     stringent tax regime offshore? So the      because we now have strong repre-
on, either servicing it or acquiring it.    domicile is a more significant question    sentation in each.’ l
   ‘It’s early days, but we have seen       than before.’
a number of companies expanding                There would also seem to be more        * A Class 3 Reinsurer is able to under-
out of Bermuda, opening up Euro-            interest in protected cell companies       write reinsurance of subsidiary insurance
pean operations in Switzerland, and         (PCCs). ‘To create your own captive        companies and has a limited capacity to
extending across into Lloyd’s, so there     entails quite a bit of expense and ongo-   underwrite third party business, subject to
is a potential we see for legacy books of   ing management and regulatory fees.        regulatory approval.

issue 29 · summer 2009                                                                                   run off & restructuring     29