Bermuda's financial services sector is standing up better to the effects of the world economic crisis than most competitors elsewhere.

John Drzik, chief executive of global management consultancy Oliver Wyman, said there had generally been a greater appreciation of risk among the Island's companies.

Oliver Wyman has just released its 12th annual Financial Services Industry Report, which shows that most CEOs see the pain continuing, with economic recovery to pre-crisis levels unlikely until at least 2011.

Mr. Drzik was yesterday in Bermuda, where Oliver Wyman, which is part of the Marsh & McLennan group of companies, opened an office last September. More than ten staff are working there now and it is expected to expand this year.

The CEO told The Royal Gazette he believes there are now expansion opportunities for those who have weathered the storm the best, as the rest are struggling to survive.

"In Bermuda, the concentration of risk in strategy was higher than in many banking institutions," he said. "The firms here have a deep respect for risk and for the need for capital to protect against downside scenarios. They appreciated that taking on too much risk meant undermining the future of the institution."

Although insurers were in the risk business, he argued that banks were too. All too often in the lead-up to the financial meltdown, US banks had compartmentalised risks instead of seeing the wider picture, the aggregated risk facing the whole organisation.

"Here in Bermuda, the right things were in place," he said.

The property and casualty insurance sector, dominant in the Bermuda market, had been one of the best performing sectors in financial services during the crisis, Mr. Drzik said.

"P&C insurers' assets are generally invested more safely — though there have been exceptions — and these businesses are better capitalised than others in financial services," he added.

"Meanwhile we expect to see risk-taking capacity to go down, and this could play out in terms of better pricing for insurance and reinsurance."

A survey of bosses conducted for Oliver Wyman's Financial Services Industry Report showed that 75 percent did not expect to see recovery in credit and equity markets until at least 2010 and some believed that deleveraging — the unwinding of debt by lending institutions — could continue through 2012, dampening economic growth. Mr. Drzik said the financial services sector, which had enjoyed almost uninterrupted growth for the past 25 years, would likely shrink and evolve into something very different over the next five years.

"It will take time to work out the leverage and to get the banks back to a strong capital position," Mr. Drzik said. "Governments and the actions they take will be key in how long the crisis persists."

Strategic planning and risk management would take centre stage as companies grappled with the changing environment, he said, presenting opportunities and challenges to companies like Oliver Wyman.

Stronger companies, he argued, should view the transitional time as a growth opportunity.

"If you are a strong company and you're still fundamentally healthy, then you should look at the changes taking place as an opportunity," Mr. Drzik said.

"Competitors in a sector adjacent to yours may be struggling and there may be an opportunity to expand into that sector. The cost of expansion will be low right now, but the cost of gaining market share could be high because competitors will be fighting for their lives."