Many businesspeople were hoping that 2011 would be the year when the economy finally kicked into recovery mode. It didn’t work out that way.For most, it was another year of trying to do more with less, a continuing fight for survival. Job losses continued to devastate families, while pay cuts and freezes and reduced hours were the price paid by many to keep their employment. Businesses will doubtless be hoping that 2011 was a year of bottoming out.The economyLate this year it was revealed that Bermuda’s gross domestic product (GDP) shrank for a second year in 2010. The 1.9 percent contraction, after inflation was taken into account, was much less severe than 2009’s 8.1 percent shrinkage, but nevertheless confirmed what most of us already knew that the Island had endured a second year of recession.Whether or not the economy grew in 2011, for most people it didn’t feel like it.The job losses continued unabated. In September, Citi Hedge Fund Services relocated 105 jobs from Bermuda to North America in the biggest publicly revealed jobs blow of the year. At the same time, the Willowbank hotel closed, costing some 46 jobs. More jobs were shed at Aircraft Services Bermuda (35), Butterfield Bank (25), Universal Electric (18), Citco (15), Allied World Assurance Company (15), Bermuda Press (14), Bacardi (13), CD&P (13) and Appleby (11). These were some of the double-digit and higher job losses reported by this newspaper, but many more posts were undoubtedly shed without being publicised.Many of the jobs disappearing had been held by expatriates. As hundreds more departed the Island, the economy suffered from the absence of their rent payments and local spending, adding to the pain. In July, the then Economy Minister Kim Wilson revealed that the number of guest workers holding one- to five-year work permits had dropped by more than 1,500 in the space of four months through the end of March, representing a 15 percent drop.The job losses continued even after Government knocked two percentage points off the rate of payroll tax from the start of April, reversing an increase implemented a year earlier, and returning the rate to 14 percent.Retail sales continued to fall. October was the 42nd consecutive month that retail sales volume fell. With two months of figures still to come in, it appears that 2011 will be the fifth consecutive year of falling sales volume.Struggling retailers were given a helping hand in October by Premier and Finance Minister Paula Cox, who announced relief from payroll tax for the sector, thought to employ around 4,000 people, for the next six months. At the same time she added ten percentage points to the rate of customs duty paid on goods purchased overseas and brought in through LF Wade International Airport by residents, raising the rate to 35 percent. This move, she said was aimed at helping the retail sector.However, this sparked increased demand for couriers, who were able to ship in goods at a lower rate of duty than that paid at the airport. Retailers called for rates on shipped-in personal goods to be raised, producing a war of words in the media between the competing interests. With Government stating in its Pre-Budget Report in December that it is considering harmonising duty rates for personal imports, it appears that retailers may win the argument in the end.Inflation remained modest, with the Consumer Price Index averaging around 2.5 percent for most of the year. However, in October the rate crept up to 2.9 percent, driven by higher healthcare costs and higher fuel costs, adding to hard-up residents’ bills.Interest rates remained at record lows, but that did not prevent more people falling into arrears with their loans and mortgages. Data published by the Bermuda Monetary Authority showed that at June 30, 6.7 percent of local banks’ loan books were classed as “non-performing loans”, or more than 30 days in arrears, a steep, 24 percent rise from the first quarter.DeparturesSome well known characters announced their retirement from high-profile jobs during 2011.HSBC Bermuda CEO Philip Butterfield announced he will be stepping down next May, to be replaced by the current deputy CEO Richard Moseley. Bermudian Mr Butterfield has been with the bank 12 years, eight of them as CEO.Axis Capital Holdings CEO John Charman will also be stepping down next year, but will remain with the company he founded in the wake of the 9/11 attacks ten years ago in the role of chairman. His long-time colleague, Axis chairman Michael Butt, who in 2011 received an OBE for his services to the reinsurance industry, will step down in May to make way for Mr Charman and will remain on the board of directors. Albert Benchimol will become the new Axis CEO.Ascendant Group announced that its CEO Vince Ingham was to retire at the end of 2011 after 25 years with the company and the electricity provider is still hunting for a replacement.Meanwhile Sheila Lines will step down from the CEO role at telecommunications group KeyTech, to be replaced by Lloyd Fray. Insurer Argus Group Holdings Ltd also had a new CEO from the start of 2011, with Alison Hill succeeding the long-serving Gerald Simons.InsuranceThe Island’s biggest industry proved its worth to the world once again, as it paid out billions of dollars in catastrophe claims in what was one of the most expensive years on record for natural disasters. A horrendous earthquake and tsunami in Japan proved to be one of the costliest natural disasters in history, while earthquakes in New Zealand, floods in Australia, Thailand and Denmark, and tornadoes, wildfires and Hurricane Irene in the US, kept the claims rolling in. Swiss Re estimated that 2011 catastrophes cost insurers about $108 billion, second only to 2005 when Hurricane Katrina struck the US.In a special report on the Island, rating agency AM Best predicted that the Bermuda market was on track to make a slight profit for the year as a whole, remarkable not only because of the huge claims, but also because investment income continued to be squeezed by record low interest rates.PartnerRe alone was hit by catastrophe losses of more than $1.3 billion. Flagstone, Platinum and Omega were among those whose share prices took a particularly severe battering over their disaster losses.Omega was also at the centre of a partial takeover saga involving former Flagstone chairman Mark Byrne, who tried to buy a quarter of the company in a deal which would have made him Omega’s executive chairman. The deal fell apart after Omega declared in its interim statement that catastrophe losses for the year had been $6 million more than previously estimated and Mr Byrne said he considered the original offer to have lapsed.Mr Byrne made a second offer of 74p per share which was rejected by the Omega board.The largest takeover saga was that involving US reinsurer Transatlantic Holdings. In June, Allied World announced it had agreed to merge with Transatlantic in a deal valued at $3.2 billion. In July, Validus, who in 2009 had acquired IPC in similar circumstances, came in with a rival bid valued at $3.4 billion. Allied World pulled out in September and Validus followed suit in November after months of claims and counter-claims and legal wrangling. In the end, it was Alleghany Corp that struck the deal.Redomiciling activity that had been a feature of the previous three years slowed down, although Lancashire Holdings changed its tax base to the UK.Insurance regulator the Bermuda Monetary Authority moved a big step nearer gaining the goal of “third-country equivalency” with the Solvency II rules for insurers, set to take effect in the European Union in 2013. Inspectors from Europe visited in May to run the rule over the Island’s insurance supervision.In October, they released their findings that Bermuda’s regulation was broadly equivalent with the stringent new rules. In addition, the report hinted at the possibility of segmented equivalency, which would mean Bermuda’s captive insurers would be treated differently according to their lower risk profile. This is something Bermuda had lobbied for and the industry will breathe a huge sigh of relief if it can be realised, as it will mean Bermuda should not be put at a disadvantage to jurisdictions like Cayman, who have chosen not to pursue equivalency.TelecommunicationsThe run-up to the long-awaited liberalisation of the telecommunications sector proved to be somewhat tempestuous in 2011.CellularOne and M3 Wireless announced a merger deal in May that created the new company CellOne, which claimed to have a market share of just over half.But the controversy started after Digicel’s acquisition’s of Internet service provider Transact from the Igility Group of Companies, announced in September. Weeks later, Digicel launched a long distance service through Transact, using Internet-based voice-over IP. This sparked a flurry of legal action from rivals who claimed Digicel was going beyond what its licence permitted, while Digicel’s position was that Transact was offering the service, as it was allowed to do.Chief Justice Richard Ground eventually referred the case to the Telecommunications Commission and Digicel resumed marketing the long distance service in December.Also in December, the House of Assembly passed the Regulatory Authority Bill and the Electronic Communications Bill, which will replace rules restricting what services telecoms players can offer with a “universal licence” that will allow companies to offer packages of different services. The legislation will also create a new independent regulator to oversee the industry.BankingButterfield Bank had dominated the banking headlines in recent years, but a year of stabilisation in 2011 saw less news coming out of the venerable institution. Three successive quarters of modest profits suggested that it is back on an even keel. However, the bank did find itself in the news in the latter part of the year after it introduced a new online banking platform, which had some teething problems. Customers initially complained of lost payee lists and an absence of payee ID when transferring funds to third parties, among other problems.Capital G Bank made progress with its amalgamation with First Bermuda Group and opened a new bank branch at the corner of Church Street and Par-la-Ville Road at FBG’s former headquarters.Financial institutions faced increasingly strict reporting requirements on the holdings of their American customers as the US clamped down on tax evasion. HSBC Private Bank, including its Bermuda branch, caused a stir in July by announcing that it would no longer service US citizens living outside the US.Bermuda Commercial Bank, awakened from four years of limbo in 2010 when it was bought out by Permanent Investments Ltd, enjoyed a rejuvenation in 2011 and recorded profits of $12.6 million for the 12 months through September. Even after a $10 million, one-off gain was stripped out, profits more than doubled from the year before.The prospect of better times ahead for the Bermuda economy will depend heavily on a continuing economic recovery for the Island’s biggest trading partner, the United States.