The Intelligent Quarterly from the publishers of The Insurance Insider

Spring 2012

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Dear friend,

It's just not fair - some countries seem to just be born lucky, don't they?

Think of raw materials, for example, and the ample resources of Saudi Arabia, South Africa, Russia, Canada or Brazil spring to mind.

And don't let's get started on Australia, a land so blessed that it even acknowledges this fact in its national tagline "the lucky country".

Is it any coincidence then, that perhaps with the exception of Australia or Canada, all the other countries would be the very last on a chairman's list when considering the location of a new headquarters for a global (re)insurer?

These guys just have it too easy. All their wealth is lying around under the ground and all they have to do is scoop it up and ship it off to a resource-hungry world. Entrepreneurialism doesn't thrive in these places because there is no need for it.

No, it is the ones who have to make their own luck who get our vote time and again.

Take Bermuda - a burnt out volcano in the middle of the Atlantic whose 19th century GDP largely consisted of the cultivation of onions (despite the notable absence of any natural irrigation) and the servicing of the Royal Navy. First, the emerging business of global tourism and then financial services were astutely harnessed to make this one of the richest places on earth in terms of GDP per capita.

And what of unlucky Ireland? The current self-inflicted woes aside, in the last 20 years it performed a remarkable recovery from an eternally backward and peripheral economy to move to the top of the EU per capita tables.

What's remarkable about the success of these economies is that it has been achieved in absolute transparency. There is no secret - just competitive tax levels and appropriate levels of regulation - with regulators and tax authorities that are interactive, predisposed to a positive attitude and genuinely keen for you to do business from their country.

Every other government in the world has known what they are doing, yet has chosen not to emulate their success but to ignore it. Large countries find it easy to dismiss such methods of governance as only achievable in small jurisdictions. This is of course utter nonsense.

To prove it meet Switzerland, the luckiest self-made country of the lot.

Its 7.6 million population means it is significantly bigger than its offshore rivals - as well as many of the smaller EU nations that it trounces on all economic metrics.

This is a country that has given itself at least a hundred years start on its rivals in the business-friendliness and political stability and pragmatism stakes.

It is in the heart of Europe but is at arm's length from the EU and in Zurich it has a well connected city a million strong that has a highly skilled multilingual labour force steeped in (re)insurance.

(Re)insurance employers setting up shop here have the best of all worlds - they can domicile in a low tax environment - but unlike Bermuda, or to a lesser extent Ireland, they can attract and retain staff with relative ease.

Now for its single genuine piece of geographical luck. It has three of Europe's top economies as direct neighbours - very handy indeed for treaty underwriters tired of air travel. But the country must take credit for its investment in superb transport links, which certainly don't come cheap in such a mountainous region.

And unlike its direct rivals it also has a domestic insurance market well worth exploiting.

All the peripheral services are here to a world class standard - and if you need finance there are one or two decent sized banks and investment groups of which you may have heard!

A mature and diversified country like Switzerland establishes beyond any doubt that there is no unfathomable secret to success in nationhood - only hard work and common sense.

So please, next time you hear a G7 politician bemoaning the "offshoring" of another major firm, do (politely) interrupt and ask what, barring the erection of suicidal trade barriers, exactly they plan to do about it.

After all, if the TransAllied deal goes through, it will see the last publicly quoted US reinsurer (Transatlantic) go offshore. It has chosen Switzerland. Naturally.

Mark Geoghegan,
Editor,
The Insurance Insider