Bermuda should not rely on a fifth wave of new insurance companies to bring new jobs to the embattled economy.

That is the view of Bradley Kading, president of the Association of Bermuda Insurers and Reinsurers (ABIR), who believes that new insurance capital is likely to come in the form of temporary sidecar structures rather than new companies.

Ensuring the Island creates an environment in which its existing insurers can grow their Bermuda operations is the best way to promote local employment growth in the industry, Mr. Kading said.

ABIR, whose members are 24 of the Island's leading international insurance companies, last week published its fourth Bermuda Economic Impact Report.

It revealed ABIR companies' hefty contribution to the local economy, including 1,800 jobs, as of the end of 2008, 1,100 of which are held by Bermudians. Total salary and compensation paid out to these employees last year was $678 million.

"ABIR doesn't see a fifth wave of new insurance companies, and we have advised the Government of our thoughts on this," Mr. Kading said in an interview. "Sidecars are the way in which we see new capital coming in.

"Existing underwriting talent is used to service these structures and so they do not create employment opportunities."

Over the past two decades, every major catastrophe to cause a significant drain of global insurance capacity has been followed by a wave of start-up companies in Bermuda, bringing billions of dollars in capital to the Island and hundreds of jobs over the years.

The spike in excess liability demand in 1986, Hurricane Andrew in 1992, the September 11 terrorist attacks in 2001 and the devastating Atlantic storm seasons of 2004 and 2005 were all followed by the arrival of batches of new companies in Bermuda.

Sidecars are structures that effectively bolt on to existing companies. They are usually formed by reinsurers to provide extra coverage for specific events. Investors put in their money for a fixed term and get it back with an attractive rate of interest if no payout is triggered. Catastrophe bonds provide similar capacity back-up.

Last year, Government passed laws updating the Bermuda Monetary Authority's regulation regime, which included a new class of 'Special Purpose Insurer' to ensure efficient regulation of sidecars and catastrophe bonds.

The key to ensure the continuing strong contribution of insurers to the local economy is to maintain an attractive environment for the Island's existing companies to do business, Mr. Kading said.

"If we're projecting ahead, we have to make sure that the companies that are here have opportunities to grow," Mr. Kading said. "They need to be profitable and they need to think of Bermuda as an attractive place in which to provide employment.

"Bermuda is an expensive place to do business. There is plenty of incentive for companies to hire Bermudians. But companies also need work permits and there needs to be an efficient process to bring in workers.

"Creating efficiencies in bringing in expatriate workers creates more jobs for Bermudians. We want companies' headquarters team to be here — the C-suite people. If they're here, then there will be spin-off jobs, in accounting, underwriting and corporate administration.

"If the HQ moves, then the C-suite people move and those functions go to another domicile."

ABIR supports a flexible policy on work permits that would encourage executive teams to be based in Bermuda, so promoting local growth.

"We are supportive of the Government's actions in rethinking the work permit process and we believe they've done a great job in improving the efficiency of the work permit processing," Mr. Kading said.

Regulation was also crucial to the future of the Island's insurance industry, Mr. Kading said, as far-reaching changes to global insurance regulation, such as the Solvency II rules in the European Union, were in the pipeline.

Regulator the Bermuda Monetary Authority was functioning well and was making good progress towards the essential goal of "regulatory equivalence" — keeping up with new standards imposed in the global marketplace in which the Island's companies compete.