I am delighted to have been given the opportunity to welcome to Bermuda such a distinguished gathering; and to tell you, in case you don't already know it, what a wonderful place this is. The Bermudians among you, who are familiar with my track record, will know that I will also want to say something about what needs to be done to keep it that way.

Assembled in this room is probably the greatest concentration of insurance and reinsurance expertise, and of related professional skills, that ever gathers in a small jurisdiction. That tells us something about the concentration of expertise that has chosen to make its home in Bermuda. It's not just a critical mass able to sustain its own activity; it is now the centre of choice for new entrants to the industry. This certainly raises difficult issues of the sustainable development as Bermuda becomes more densely populated. But people do not generally complain about having to live in Bermuda. It is clear that this island of less than 25 square kilometres, an Overseas Territory of the United Kingdom, more remote from any other centre of population than is any comparable place, must be doing something right.

The London Economist, remarking on the prevalence in the insurance industry of what it called the "men in shorts" ? thus committing the solecism of assuming that any business person would wear Bermuda shorts before Bermuda Day in May ? asserted that low taxes are Bermuda's biggest draw. Having the right tax regime certainly helps. But Bermuda's attraction goes well beyond issues of taxation. Plenty of jurisdictions offer a tax efficient environment. What distinguishes Bermuda is reputation.

Professionals want to work where their professionalism is recognised, valued and respected. Managers want to work where the business environment is predictable and honest. Shareholders want their companies to be headquartered in a jurisdiction widely recognised as stable and clean. And policy holders want to be sure that their insurers are regulated in accordance with best international practice.

Here in Bermuda we have taken care to build up our reputation in all those areas. It has been a success story that reflects great credit both on those who have worked in the industry here, on successive Governments of Bermuda who have worked, and continue to work, to create the right environment for it, and on the Bermuda Monetary Authority, which has regulated the industry with a firm touch.

Reputation is hard to build, but easy to lose. So let me just say a word about three things that need to be done in order to maintain it.

First, all offshore financial entities most continue to satisfy external scrutiny. There is absolutely no sign that the international scrutiny, sometimes amounting even to international hostility, of offshore financial centres is going to abate. On the contrary: it is going to intensify, as financial instruments become more complex, as the volume of transactions increases and as finance ministers become ever more concerned about money laundering, terrorist finance and global financial stability. We may take some satisfaction from the Group of 30's conclusion, in their report just published, that the reinsurance industry is unlikely to pose a potential threat to the global financial system, both because of its modest size in relation to the size of global capital markets and because you have proved your resilience in the face of substantial losses. But that does not mean that all the regulatory issues are settled, and the G30 does have some firm things to say about the need for greater transparency. You have a separate session on regulation and I will not intrude on that, beyond saying that as Governor I take, and will continue to take, a close interest in the extent to which Bermuda measures up to emerging international standards. Our regulatory regime is being continuously enhanced in order to keep it efficient, effective and consistent with those standards. Second, all offshore financial centres must have the will and the capacity to deal decisively with wrong doing. Regulation is only partly preventative; it must also be, if necessary, punitive. The detection, pursuit and prosecution of white collar crime, especially where it crosses international borders, is a real challenge for all but the most sophisticated jurisdictions. We in Bermuda are determined to ensure that we remain among those. There will be no cover-ups. Bermuda is the wrong place for those who want to do wrong.

And third, those who carry out business in offshore financial centres must also set, and aggressively police, their own ethical standards. You must know your customers as well as you know you own businesses. Everyone who conducts business on this island has, or should have, a common stake in the maintenance of its reputation. All the regulation in the world will not create a perfectly clean environment; but individual businesses can. In my last job I was responsible to the British Government for a budget a little larger than Bermuda's GNP. We were, rightly, subject to a good deal of attention from auditors, both internal and external. But the question I learned to ask myself was not, is this operation audit proof, but ? is this operation conducted in a climate of financial probity? And to those who came to me asking for ethical guidance I had only one answer: would you be happy for the details of this proposition to be published on the front page of a newspaper? If the answer was no, there was usually something wrong. The imperative of commercial confidentiality is seldom greater than the reassurance of transparency. It is in such a climate, in such a corporate culture, that those who come to Bermuda to conduct business have always been, and will always be, expected to work.

Let me end on this note. 2005 posed huge challenges for the global reinsurance industry. The scale of insured loss resulting from natural disaster was unprecedented. Inevitably, shareholders took a hit.

But what I observed was capital markets working as they are supposed to work. New capital flowed in to an industry that proved five years ago that it could cope with the Twin Towers, and proved last year that it could cope with New Orleans. Far from posing a threat to global financial stability, this industry is a mainstay of it. And Bermuda is and will remain at its heart.