billion dollar buy-out of the Island's biggest bank, a US probe into the insurance sector that put practices at some of Bermuda's top insurers under a microscope, the threat of unprecedented storm activity knocking significant income off balance sheets and concerns over the high costs facing Bermuda companies ? these were but a few of the issues rocking the Bermuda business world in 2004.

Both the Island and the companies based here were much in international headlines through the year.

The most damning media coverage followed Bermuda companies coming under fire from New York Attorney General Eliot Spitzer (pictured in middle of page) in a high-profile investigation of the insurance sector. The unfriendly media glare continued following testimony by Mr. Spitzer to the US Senate when he directly named Bermuda in his criticism of insurers headquartered offshore.

In an address to a US Senate subcommittee in November, Mr. Spitzer charged that a stage had been set for conflict of interest, steering and self-dealing in both insurance and reinsurance markets after the two largest global insurance brokers, Aon and Marsh, helped establish a number of Island-based companies.

Mr. Spitzer added that there were tax implications in companies being headquartered offshore as well as companies being able to use their non-US status to evade state insurance regulation.

Mr. Spitzer tossed the Bermuda-bound barbs after an intensive probe of the insurance industry turned up evidence of brokers being rewarded for placing business with certain insurers. Worse still, Marsh and certain insurers were found to have engaged in a bid rigging system to create the sham appearance of competition. Those allegations involved at least one Bermuda company ? ACE Limited ? being named in Mr. Spitzer's suit against Marsh with claims its US unit had taken part in the sham bidding process.

Several other Bermuda companies have also been subpoenaed by Mr. Spitzer's office in the course of his probe into how insurers compensate brokers for placing business for them.

Bermuda also got slammed in the run-up to the US presidential election last month with now defeated Democratic hopeful Senator John Kerry vowing all along the campaign trail to, if elected, shut down the so-called 'Bermuda tax loophole'. He branded companies moving offshore as 'unpatriotic' for following a practice that he claimed deprived American tax coffers.

However, many seemed to recognise Sen. Kerry's political rhetoric for what it was. In a media briefing early in the year, members of the Finance Ministry and those lobbying on behalf of Bermuda on Capitol Hill said fears of fall-out from Sen. Kerry's Bermuda bashing had been overblown. They also said there was little chance he would have followed through on the threats, if he'd been successful in his bid for the Oval Office.

Not all the 2004 media splash on Bermuda firms was negative though, with a number of companies actually garnering praise in international publications. This included 20 Bermuda-based companies making the prestigious annual Forbes' Top 2000 list.

In January, Finance Minister Eugene Cox died after a battle with cancer. Within the month, his daughter, Paula Cox, was named to take up the Island's purse strings. The move meant that she, within a month, had to deliver a budget largely designed by her father.

Meanwhile, Bermuda-based insurers and reinsurers were faced in August and September with unprecedented storm activity in the Atlantic and Pacific. Many were hit with millions in claims during the third quarter but generally, the long-term financial viability of Bermuda-based companies escaped without blemish.

However, the devastating tsunami in Asia last Sunday could impact some of the Island's global insurers and reinsurers. But yesterday the extent of the tsunami's impact was not yet clear as no reliable estimates of total insured losses had been set.

A Fitch report released this week said it did appear that a "significant portion of the property damage is not covered by insurance, though that varies from country to country". Estimates of total damage were said in international news reports to be in the region of $14 billion.

Locally, the biggest business news this year was undoubtedly the sale of the Island's largest bank, the Bank of Bermuda.

The bank's $1.3 billion sale to multinational banking giant HSBC Plc. was voted through by a majority of shareholders on February 16 - but not before dividing the community along emotional lines. Some felt the prospect was good for Bermuda, even if it did spell the end of an era with HSBC being the first foreign bank to be allowed on to these shores. Others saw the move as Bermuda selling out.

The very day after the sale went through, there was a management swap at the bank with CEO Henry Smith and CFO Edward Gomez being bid adieu while then COO Philip Butterfield was named to the top post. This marked the first time a black Bermudian had been appointed to the helm of a major Bermuda bank. But taking up the COO and CFO spots were two HSBC veterans, Andy Gent and Nigel Crow.

In October, the bank said its amalgamation with HSBC had already led to about $13 million in savings while staff numbers had fallen by about 40 despite warnings, at the time the sale was announced, of up to 250 job cuts being in the pipeline. And this month, the bank said its work on integrating its global offices ? with it having had operations in Bahrain, the Cayman Islands, Dublin, a Swiss joint venture, Guernsey, Hong Kong, Isle of Man, Jersey, London, Luxembourg, New York and Singapore before its buy out ? into the HSBC network was well underway.

On the consumer front, local residents saw a price war between Internet Service Providers that brought the cost of getting online to all-time lows.

But otherwise, the cost of goods rose steadily through the year with inflation tracking throughout the year at three percent or higher.

At Press time, the latest data available from Government was for October when the average price of consumer goods was 3.7 percent higher than a year ago. That compared to 3.9 percent inflation in September, which prompted concerns from the business community.

At least two business leaders ? Eddie Saints, who recently stepped down as president of the Bermuda Employers' Council (BEC) and Bank of Bermuda boss Mr. Butterfield ? both raised a warning cry about the high rate of inflation pushing up the overall costs of goods. In addition, they voiced concerns specifically on a spike in the rate for health coverage locally a cost borne by both employers and employees. On top of that they said that businesses have had to grapple with a hike in social insurance costs after Government significantly increased the portion that employers are bound to pay to Government, when announcing the last budget in February.

On top of these higher costs, Mr. Saints said corporate bosses were also worried that a recent 4.5 percent wage increase inked by Government for civil servants could become the benchmark for other wage negotiations. He warned that profits for some businesses were already perilously thin, and that costs had to be contained.

Although businesses might be concerned about higher costs, the Island's construction sector continued to tick along with more building projects in the pipeline and projections that the busy times could carry on for several years to come.