Premier Alex Scott told delegates at the inaugural Bermuda Captive Conference yesterday that the Island is open for their business and will continue to protect its place as leader in the captive insurance industry.

"Competition for our captive business is intense but Bermuda will continue to insist that it must be fairly contested on a level playing field. No overseas versus domestic untruths should be encouraged by any authorities in any jurisdiction," Premier Alex Scott said.

As of August 31 this year, the number of active captives in Bermuda stood at 954, making up the majority of Bermuda's 1,424 active insurers. Premier Scott said that this figure gives Bermuda about 30 percent of the captive share worldwide.

"No one else comes close. Some in recent years have closed the gap though. We are not complacent. Bermuda is focused not only on further consolidation of our lead position but also on growing our captive industry," he said adding that delegates will not find a more receptive business friendly environment assuring delegates that the Island has the "expertise, infrastructure and a can do attitude to back it up."

Premier Scott said however that in the face of brisk competition for captives, the Island must remain vigilant and protect its position and reputation.

"None of the recent problems of improper practices faced by the global insurance industry were specific to the US or international insurance markets, however it is a smart business practice to review and update practices and procedures. Bermuda or any domicile in the US or elsewhere will attract equal unwanted attention if that jurisdiction supported or encouraged any improper practices. We pride and guard our reputation. You can rest assured that the US authorities have the highest regard for our regulatory regime," he said adding that independent regulator The Bermuda Monetary Authority is an active member of the International Association of Insurance Supervisors.

While Bermuda now has a more diversified market than in the past with medium to large capacity insurers and reinsurers, Premier Scott said that captives will continue to play a significant role as the global economy shifts and as crises such as Hurricane Katrina continue to emerge.

"Each facet of our industry has similar but significantly different business risk factors. Captives must play an indispensable part of the recovery of the southern American economy and gulf states region after Katrina," he said. "They are needed to reduce insurance costs to American business at the most efficient level. This would enable corporations to use more resources towards economic recovery while continuing to address the risk management needs."

Minister of Finance Paula Cox told delegates yesterday that the success of the Bermuda model of efficient and effective regulation is a result of a combination of factors including open dialogue between government and the business sector, a commitment to quality business, the development of a strong local professional sector and the implementation of a fairly enforced and appropriate independent regulatory regime.

She said however that one of the biggest challenges today is international activity that has drawn the world's attention to regulatory standard setting issues. These need to be addressed regardless of whether companies operate onshore or offshore, but in each case the focus should be on the issue of effective supervision and regulation, she said.

"Our stance has consistently been to insist on knowing the customer and taking a case by case decision as to the persons and types of business we allow to operate within our shores and that situation very much continues today,"she said adding that in applicable circumstances Bermuda has declined business over concern about potential risk or damage to the Island's reputation.

"It is our intention that regulatory standards must be practical enforceable and able to be implemented in a cost efficient way," she said.

Imposing requirements which do not aid effective regulation creates an unlevel playing field in smaller jurisdictions such as Bermuda, she said.

The Island has a long history of financial services and is uniquely positioned to look at its own markets and justify how, when and why it implements specific standards, the minister said. "It has never been the case that we adopt regulations blindly or unthinkingly, that is not the Bermuda way, but we are fully committed to meeting high standards and best practices," she said.

Bermuda Monetary Authority chairman and CEO Cheryl-Ann Lister told delegates that Bermuda remains committed to a risk based approach. Captives, which are not dealing with third party business are seen as lower risk than commercial insurers and reinsurers which are writing third party business.

"Overall the thing that we try to make sure with captives is that we want to be firm fair but flexible," she said adding that the BMA strives to ensure a good dialogue with industry.

BMA supervisor of insurance Jeremy Cox said that standard setting groups such as the International Association of Insurance Supervisors do not yet fully understand the captive concept so the BMA along with representatives from a number of other jurisdictions is now working to put together an issues paper for the IAIS. "We think it will aid them in trying to understand better the captive concept and how these international standards should be tailored or adjusted or made more practical for the captive sector," he said.

Mrs. Lister is hopeful that the paper will achieve "buy in" from the IAIS and help them understand that the approach taken to regulate captives should be very different from the approach taken with regulating the retail or commercial sides.

"Because we have had the opportunity, we have been able to and continue to lobby to ensure that the right approach is taken in this regard and that the one size fits all is not pushed on us," Mrs. Lister said.

While the captive industry may be concerned about too much regulation because of the introduction of new international standards, Mr. Cox said that the standard setting bodies are not super regulators and Bermuda is only going to adopt those standards that are appropriate for the market here.

"What we attempted to do in Bermuda is to make sure we have a seat around the table, let people know the type of market we have here and demonstrate to them that we have reviewed those standards and taken the elements we think are appropriate for Bermuda," he said.