Report: Challenges For (Re)Insurers
While total premiums written by Bermuda (re)insurers in 2010 amounted to $112 billion — meaning that Bermuda remains one of the largest and most important markets for insurance globally — the industry faced some unanticipated challenges this year and more trying times lie ahead, according to a newly published report.
Business Monitor International’s “Bermuda Insurance Report” was released on Thursday (Dec. 16) and says while 2009 will be remembered as “an unusually good year for Bermudian (re)insurers”, losses incurred by the Chilean earthquake, storms in China and lacklustre financial markets put a damper on profits this year.
“One of the biggest issues facing the Bermudian insurance industry … is the controversial US corporate tax policy bill that would add to the island’s reinsurers tax burden,” said the report. “The proposed legislation would stop non-US insurance groups with subsidiaries ceding some of the risk to an offshore affiliate reinsurer to reduce taxes.
“The Association of Bermuda Insurers and Reinsurers (ABIR) has strongly opposed the bill, suggesting that it would be counterproductive for the US, raising the burden on consumers and reducing insurance coverage.”
Business Monitor International said in practical terms, the global nature of most of the larger Bermudian insurance companies is such that they would be able to mitigate the impact of an adverse change in US tax law.
“Over the medium term, a greater challenge could well be competition for international/global (re)insurance business from countries such as Ireland and Switzerland,” said the report. “Both can benefit from proximity to Europe, double taxation treaties (DTTs) with the US and, even compared to Bermuda’s standards, access to suitably qualified personnel.”
The report added Bermuda continues to boast a combination of strengths — the lack of income tax, a first-class regulatory regime, proximity to North America and the development of a sufficiently large community of people with the requisite skills — to give it a position that appears unassailable.
“Bermuda has 16 of the world’s top 35 reinsurers, according to ratings agency AM Best, and has the largest property-catastrophe reinsurance market, supplying 40 percent of the US and European Union market,” said Business Monitor. “Bermuda also has well over 1,000 captive insurers. (The actual number of captives is difficult to define because many of these insurers are cell companies which service several different clients simultaneously through rent-a-captive programmes).”
London-based Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets.
The full Bermuda insurance report can be purchased here.
