High risk, high reward?

"Deepwater Horizon" sounds a little bit like an idyllic holiday resort but in actual fact it is widely billed as the worst oil spill in U.S. history. In the last few days, following predictions of the cross-Atlantic course the slick is likely to take from the Gulf of Mexico, experts have been trying to forecast the potential damage to Bermuda. 


According to this YouTube clip, we seem to be sitting right in the middle of its path. Although the latest news from those in the know is that the impact here is likely to be seen in the form of tar balls washing up on these shores sometime around September. Not particularly desirable but at the same time no apocalyptic destruction of the beautiful beaches. Something to be grateful for. 





As well as lying in the pathway, Bermuda has another connection to this major international news story - the world of insurance. The disaster has called into question the ethics of the multi-billion captive insurance industry. Now here's the complicated bit... concentrate! 


What is captive insurance? 
In very basic terms it's where a massive company like BP carries such a high risk factor and owns such much property that it could never afford the premiums for a typical insurance policy to protect its assets. So it insures itself, creating a captive, a subsidary to act as (very large) piggy bank to cough up in the event of an issue larger than any tissue could resolve.


Why is it shady?
Well captive insurance in reality seems to mean that you aren't really insured, just on paper. Captives are usually based offshore where the profits they makes are tax free and the premiums are tax deductible to really fatten up that piggy bank for a rainy day. I suppose the question really is, if you are insuring yourself then are you gonna make things easier for yourself than if a entirely independent underwriter was in charge. Probably. And what does that mean for safety regulations, do the little things slip the net and eventually turn into a 150-mile oil slicks?!


What is the Bermuda connection?
There are more captive insurance companies listed here than anywhere in the world, somewhere in the region of a 1,000 at last count. That means there is a hell of a lotta money on this 24 miles of land making Bermuda's GDP per capita one of the highest in the world (Although BP's captive, Jupiter, is based in Guersney rather than here).


So what's my point?
KARMA


To put this in simple terms... the left hand is feeding Bermuda while the right hand is robbing it blind. It's not so easy to be both beautiful AND rich after all.