REMARKS OF U.S. CONSUL GENERAL GREGORY W. SLAYTON
to the PLUS Bermuda Conference of June 3, 2008  (v6, June 2nd draft)

Good morning and welcome all to the Professional Liability Underwriting Society’s annual conference.  Thank you for inviting me to speak to you today. I am honored to be here.

Today I’ll be talking about United States/Bermuda bilateral relations, now and under a new administration – and what risks and/or opportunities that might entail for Bermuda based underwriters:
o   Where we are now
o   Challenges we must confront together – and the risks of failure
o   What the future might hold for US/Bda relations under a new administration

I.              Current Bilateral Relations are Good – and getting Better

I think it is safe to say that the relationship between the United States and Bermuda is at or near an all-time high, marked by mutual respect and cooperation on a wide variety of fronts. We have developed a good rapport throughout all levels of government – and we enjoy a healthy, open dialogue on a wide variety of issues. This is based in large part on the deep and long-standing ties that bind our nations together:
o   Shared values and culture
o   Approx 8.000 US citizens living in Bermuda.
o   Approx 500,000 US tourists visiting Bermuda this year. In fact, Bermuda is one of the top ten destinations visited by Americans.
o   Well over 250 billion in US capital in Bermuda.

However, there were some bad feeling that characterized discussions even just 4-5 years ago, and I think it’s instructive to understand how they came about – if only to be able to avoid them
o   Sale of Chelston and return of US base lands led to less immediate communication and cooperation – and perhaps a sense that the relationship wasn’t important anymore
o   Election of new govt’s (the PLP in 1998 and the GOP in 2000) that didn’t know each other and perhaps didn’t properly prioritize the importance of building the relationship
o   A period of revolving door ‘leadership’ at the US Mission (five CG’s in seven years???)
o   Misunderstanding on both sides of the critical importance – and the mutual benefits – of the US/Bda relationship

Today, things have improved dramatically. Our governments regularly discuss issues and concerns of common interest: 
o   Access to the U.S. – stop list and waivers.
o   Joint anti-money laundering improvements.
o   Inter-governmental exchange programs (ex: Voluntary Visitor Program)
o   Facilitating information exchanges between international companies and the government on education, financial and other matters.

It is important that we act as neighbors and friends, not least because our economic relationship is mutually advantageous.  Bermuda relies on the U.S. for -
o   Imports (over 80%)
o   Tourists (approx 80%)
o   Specialist medical care
o   University education
o   Etc…

This important partnership is very much a two-way street.  After 9/11, Bermuda-based insurers and reinsurers paid over $2 billion in total insured losses. In the years since they have poured more than $20 billion for catastrophic loss payments into the reconstruction of the US economy.

II.            Challenges that we Must Confront Together… and the Risks of Failure:

• BERMUDA MUST CONTINUE TO STRENGTHEN ITS REGULATORY ENVIRONMENT
  - To safeguard the international financial sector that is the #1 contributor to Bermuda’s GDP (which is the highest in the world on a per capita basis) it is in the Island’s best interest to model the highest global financial standards
• BMA moving to strengthen the regulatory environment for Bda based international financial companies by moving towards a quantitative regulatory framework with a strong investigative arm and appropriate disciplinary powers…all in concert with the growing trend towards a normalization of international financial standards (even though this is extremely difficult for the insurance and reinsurance industry).  The Geneva Association hosted its 35^th Annual General Assembly here in Bermuda last week – a total success and another sign of Bermuda’s increasing int’l role and respect
• Bermuda must continue to strengthen its AML regime. The IMF Report pinpointed weaknesses in existing law – as well as in funding and staffing levels to properly enforce existing regulations. 
  o   In this year’s Throne Speech, Premier Brown committed to addressing these concerns as a priority and upgrade relevant legislation as soon as possible.  And the GoB has distributed a consultative package to key stakeholders on May 1, 2008, to solicit views on the AML changes that are being proposed. This is all very good news.
• RISKS OF A FAILURE TO STRENGTHEN BDA’s REGULATORY ENVIRONMENT:
  o   Bermuda’s status as a premier international money-center would be tarnished
  o   Pressure for publically traded companies to relocated HQ’s away from Bda wd grow
  o   Flow of assets from other countries (US and UK) might diminish – therefore reducing primary and secondary (construction, legal and acctg services, etc) job creation
• BERMUDA MUST SUCCEED IN ITS EDUCATION/SOCIAL REFORM EFFORTS TO ENSURE COMMUNITY STABILITY AND PROSPERITY
  Ø  A recent study by Jane’s Information Group on the various factors that establish a country’s stability ranked Bermuda 52^nd out of 235 countries surveyed, including the rival Cayman Islands (44^th), British Virgin Islands (46^th) and St. Lucia (48^th).  Education is a key factor surveyed given the pivotal role it plays in preparing young people to assume economic leadership and citizenship roles.

 

• I commend Premier Brown and Education Minister Randy Horton for acknowledging the truth openly and taking action to correct it. That takes courage and commitment because change is difficult.
• In our own small way, the American Consulate has a role to play in upgrading public education.  This fall the Consulate will send its 4^th Voluntary Visitor team of Bermudians to the United States. Their goal this year will be to study top education programs, with a view to adopting policies and programs that have application to Bermuda.   This effort will complement the rigorous campaign already underway in Bermuda’s education system and dovetail the March field trip to New England vocational schools led by Minister Horton.
• Locally, Bank of Bermuda CEO Phillip Butterfield and I have co-hosted several meetings with corporate leaders to gain their input about how public education in Bermuda could be improved.  What is 100% clear is that the international business community is 100% behind improved education 
• But corporate support is not enough. Government cannot do it alone, nor can teachers or parents. What is needed is a partnership of all these elements, with children in the middle.  The mindset must be one of continuous educational improvement, which generates opportunity in the workplace and social cohesion.
• WHAT ARE THE RISKS OF A FAILURE TO IMPROVE THE BDA EDUCTIONAL SYSTEM?
  o   Growing social tensions as a small but significant portion of the Bermuda population feels it is cut off from the benefits of Bermuda’s huge economic success
  o   Potential continued increase in petty and violent crime – as well as drug use
  o   Impairment of the Island’s sterling reputation as a safe and law-abiding jurisdiction, with potential negative impact on capital and job creation in Bermuda
  
• Let me be clear, I do not believe that either of these will happen. But the risks are there – and the imperative for improvement in both areas is clear. In the 21^st Century no country can stand on its reputation or on its past success. Jurisdictional competition for intellectual and financial capital is already strong – and will only grow stronger in the years to come.

 

III.           US/Bermuda Relations under a New American Administration

Communication, no matter what the topic, is critical in any relationship, which is why I have committed to arranging a third annual “state visit” for the Premier and Deputy Premier to meet with their counterparts and other leaders in Washington.

The past two consecutive Washington visits with influential legislators and top-level executives – with enthusiastic support from the Premier and Deputy Premier – will stand Bermuda in good stead for the future, whichever party wins.  For example, we met with:
o   Secretary of State Condoleezza Rice
o   Senator John McCain, Senator Barak Obama and Senate Fin Comm Chair Max Baucus
o   Leaders of the Congressional Black Caucus including Chairmen Charles Rangel and GK Butterfield 
o   Senator Sam Brownback   /   Senator Norm Coleman   /   Senator Susan Collins

Premier and Deputy Premier have themselves worked hard to establish strong, productive relationships with many Congressional leaders – and the GoB has greatly strengthened its representation in DC

So I think a good foundation has already been laid for strong future bilateral relations under either Party

With a Republican win, Senator John McCain’s visit to Bermuda in 2007, when he met with the Premier and a host of Bermuda leaders, will provide firm groundwork upon which to build closer ties. The Senator has a long and positive history with the island since the days when he was a naval aviator and his pro-free market, limited govt and low-tax philosophy should be a boon to Bermuda.

If the Democrats are successful, I hope that Senator Obama’s positive and optimistic message will lead to a further strengthening of our countries’ ties.

But the responsibility will be on the leaders of BOTH countries to be sure that the relationship goes forward and not backwards by
o   Continuing of the annual State Visit to DC and the hosting of reciprocal visits here in Bermuda
o   Continuing of the massive July 4^th and Thanksgiving Celebrations that reinforce the shared culture and values that bind us together – while benefiting Bermuda’s non-profit sector. The fact that Bermuda hosts the world’s largest July 4^th Celebration outside the US is not lost on Americans who know of it.
o   Continuing to strengthen and improve Bermuda’s representation in Washington – and improving the cross industry effort between various pro-Bermuda groups (ABIR, ABIC, etc)
o   Insuring that this relationship is a high priority for both governments going forward

WHAT ARE THE RISKS OF A FAILURE TO IMPROVE US/BDA RELATIONS?
o   They could be fairly minor: as happened from 1995 – 2005
o   They could be fairly major: as even a small change in the US tax code could have a very significant impact on Bermuda’s economy
o   They could be huge: a legislative change taking away Bermuda’s preferential tax status with the US could be fatal for the international financial sector in Bermuda (i.e. estimated to be 40% of the Bermuda economy directly and well over 50% if you include secondary suppliers like builders and restaurant/hotel service providers). Or USG changes (like nationalizing the reinusurance industry – see lead story in Sat’s WSJ) could gravely impact Bermuda based reinsurers.

It is up to each of us – very much including our government leaders – to make sure this does not happen going forward.

Thank you for your time/attention and the opportunity to speak to you today