The seismic shifts occurring in the international insurance market are relevant to all residents, whether or not we have any direct connection to the Island’s most productive industry. This week’s events brought into sharp focus what happens when companies merge and the high stakes involved for Bermuda.

Bermuda is home for many juicy takeover targets in this crowded marketplace, meaning that the unstoppable force of consolidation is making a heavy impact here. Bermudians are like bystanders watching a traffic pile-up in slow motion, wincing with every collision and hoping desperately that the damage will not be too bad when it’s finally run its course.

The damage is in the form of jobs, people and income lost to the island. A classic example was Endurance Specialty Holdings’ takeover of fellow Bermuda firm Montpelier Reinsurance. The deal closed last Friday and this week many Montpelier employees learnt their fate. Though Endurance was not forthcoming with details about the job impact in Bermuda, a source who contacted this newspaper suggested that as many as 40 of Montpelier’s approximately 67 employees would be let go.

The repercussions will be felt widely, particularly as financial-services jobs like these tend to pay better than average. Some will be Bermudians who relied on these salaries to pay mortgages and school fees and to patronise local retailers and eateries, not to mention chipping in to support less well-off members of the family and donating to charity. Others will be expatriate workers, many of whom may now leave the Island with their spouses and dependants in tow. Bermudians will suffer from these departures, as the rents they paid to local landlords will be lost, as will their everyday spending.

The Bermuda Government, which already has a net debt of more than $2 billion, will lose payroll tax revenue for each redundancy and other kinds of tax and fee income as well in the case of the departing guest workers.

The loss of 40 handsomely paid workers has an outsize impact on an island whose entire labour market consists of only 33,475 jobs, at the most recent official count. But when one multiplies this instance several times over, as is happening in the midst of this “merger wave”, then the seriousness of the threat it wields to a fragile economic recovery becomes clearer.

Other combinations with job-loss impacts have involved RenaissanceRe and Platinum, as well as XL Group and Catlin. But the Island truly dodged a bullet with the news on Monday that PartnerRe had scrapped its plans to merge with Bermuda rival Axis Capital in favour of a straight takeover by Italian investment firm Exor, which will leave the staff intact and the company continuing to be based in Bermuda. An amalgamation with Axis would certainly have led to job losses, as made crystal clear by the two companies’ stated intention to achieve $200 million a year in cost savings through their merger.

As we wonder who will be next to strike a deal, we must view these consolidation body blows with some perspective. Insurance has been a reliable provider of prosperity in Bermuda for decades and will continue to be. The merged companies, after all, will certainly be bigger and hopefully more competitive players in what has become a tough insurance market. Many observers believe the M&A spree is long overdue and that the industry will be stronger for it. So in the long run, it could be seen as short-term pain for long-term gain for Bermuda.

There are also lessons to be learnt. The reason why Bermuda is so vulnerable to a consolidation trend in one particular industry is the lack of diversification in our economy. The Bermuda Business Development Agency, the publicly funded organisation charged with luring new business to the Island, is well aware of this, and its business ambassadors and focus groups are working hard under the radar to attract new types of international business here, from biotechnology to movie making.

For such efforts to help our economy, it will require us to provide a welcoming environment to businesses that could help to repair at least some of the damage left by the insurance mergers. Also, as a community, we should appreciate that small, highly specialised start-ups will inevitably require the kind of specialised expertise that may not be available in Bermuda. Given the opportunity to establish themselves and grow, such start-ups could generate jobs for Bermudians. In the meantime, they will certainly contribute to Bermudian livelihoods, through their consumption of goods and services, and their taxes.

Although such enterprises are unlikely on their own to produce the thousands of jobs that we need, a revival in tourism might. With major hotel projects looking poised to become reality at last and the America’s Cup about to give the Island an unprecedented measure of global exposure, there are more realistic hopes for a resurgence in the hospitality sector than we have enjoyed in many years.

The insurance mergers are dictated by free market forces and there is nothing we can do to stop their painful impact. What we can do is to try to position ourselves on the right side of market forces — that is, to create an internationally competitive and welcoming environment — to attract businesses beyond insurance. That may be the key to creating opportunities for the Bermudians displaced from the workforce by ongoing events.