The BMA is taking a proactive role in managing the ripple effects of sub-prime on Bermuda in a way that mitigates risk effectively. In response to the sub-prime mortgage crisis, the BMA has been conducting market surveys since August 2007 to assess the impact of this global issue.
At the BIBA Roundtable in New York on Tuesday, 30 September 2008, Matthew Elderfield, CEO of the BMA, said that, to date, the Bermuda market had proved to be resilient. Bermuda’s banks have limited exposure to financial loss from investments in sub-prime securities and no Bermuda Bank has suffered a credit rate downgrade as a result of the sub-prime crisis. However, in the insurance sector in Bermuda, it appears that a number of the financial guaranty companies, could potentially struggle and be at risk if re-structuring plans are not confirmed in the short term.
Mr Elderfield said that the surveys the BMA had undertaken in the market had assessed companies’ exposure with respect to sub-prime risks in both their investment portfolios and underwriting exposures. This involved rigorous stress tests in relation to solvency and liquidity positions to investigate the impact of sub-prime in Bermuda and has resulted in enhanced monitoring of a handful of the most affected financial guaranty firms. The BMA are continuing to monitor the situation as it develops.