Premier and Minister of Finance, the Hon. David Burt, JP, MP, is once again able to inform the public of positive findings of an assessment of Bermuda by a rating agency. Kroll Bond Rating Agency (KBRA) has released today the results of its recent review of Bermuda. In this assessment, the rating agency affirmed Bermuda’s long-term and short-term issuer ratings. The long-term rating was affirmed at A+ with a stable outlook, while the short-term rating was affirmed at K1+. The A+ long-term rating is in the third tier of KBRA’s rating index and indicates that the bond issuer is determined to be of high quality with a small risk of loss due to credit-related events. The K1+ short-term rating is in the top tier of KBRA’s rating index and indicates that the issuer has an exceptional ability to meet short-term obligations.
The Premier stated, “I am pleased to report that KBRA has maintained Bermuda’s long and short term issuer ratings at A+ and K1+ respectively. The outlook remains stable after being upgraded from negative in 2021 reflecting the Government’s commitment to fiscal restraint and expectations for a modest economic recovery over the medium term. The stable outlook for this year is based on continued fiscal restraint, the recovery of tourism and KBRA’s expectations for durability in Bermuda’s status as a financial hub.”
KBRA has indicated that the decision to affirm Bermuda’s positive rating and outlook is rooted in their expectation for Bermuda to be largely resilient to moves towards global corporate tax reform and Brexit. Other considerations include the country’s high wealth level and strong institutions, as well as a high-quality regulatory environment. Further, Bermuda being recognized for its world class (re)insurance and alternative capital sectors such as Insurance Linked Securities (ILS) and Bermuda’s large current account and international investment surpluses along with sizeable net external assets particularly in the financial sector were also seen as key factors .
The report also mentions the country’s economic and government financial strength stating that the economy is characterized by very high per capita GDP, strong and stable institutions and a flexible, well-managed and innovative investment environment. It is stated that Bermuda’s success in generating a high per capita income relates to its expertise in international financial services, especially (re)insurance, but increasingly in alternative capital alongside new opportunities in fintech, digital assets and other services. KBRA also proclaims that the government of Bermuda has a track record of responsible fiscal policy, including the establishment of a sinking fund to finance debt payments due, multi-year budget planning and reliance on debt ceiling caps.
In reference to the report, the Premier further remarked that, “Bermuda scored very well in on traditional areas such as the economy and fiscal performance. Further, over the last few years rating agencies are giving more credence to Environmental, Social and Governance (ESG) management. In this regard, the report speaks favorably about Bermuda’s management of extreme weather event risks through our advanced infrastructure, building codes that ensure hurricane resilient structures, insurance on government buildings and responsible planning codes. We also received praise on our efforts to improve sustainability which include reducing our carbon footprint and preserving the marine ecosystem. Special mention was also given regarding the government’s establishment of a Climate Action Task Force in 2021 that includes stakeholders across the spectrum.”
Although there were many positive factors contained in the report, there were also a few risks that were discussed. The report stated that Bermuda has been resilient to international tax reform thus far, however the minimum corporate tax rate could be a challenge in the future and Brexit could create legal and regulatory risks in the future. However, it also stated that both of these risks are expected to be manageable. Other risks noted include inflation and its impact on economic growth and public finances and the risk of a recession in the US which is Bermuda’s most important tourism market.
The Premier concluded that, “Overall Bermuda received a positive report from KBRA. The rating affirmation and continuation of the stable outlook demonstrates that the agency believes that the country is on a steady path under the stewardship of the PLP Government. This rating affirmation from KBRA, who is an independent, well respected rating agency, will allow Bermuda to continue to have access to capital at relative low interest rates as borrowers will have confidence in Bermuda’s ability to honor our debts in the near and long term. It also helps to support Bermuda’s attractiveness as a good place to conduct quality business”.