NU Online News Service, Sept. 9, 3:35 p.m. EDT
Reinsurers are increasingly looking to find a home in Europe as companies remain concerned about Bermuda's status with regard to tax legislation in the United States, according to Standard and Poor's.
Bermuda and Europe continue to vie for the top spot for reinsurance domiciles. Bermuda's tax system, closeness to the U.S. and favorable regulatory system has made it the country of choice since the late 1990s. However, changes in Bermuda's tax rules could scare off some companies from settling on the island.
"Changes in the U.S. rules regarding taxation of U.S.-sourced business going to Bermuda and other low-tax domiciles in the coming years remain a possibility," said S&P in a report, "Choosing a Domicile Remains a Hot Topic for Global Reinsurers."
"Although the full scope of such potential changes remains unclear, many market experts expect them to be most relevant for Bermuda-domiciled reinsurers with U.S. subsidiaries that quota share a significant proportion of their gross writings to Bermuda," S&P added.
Ireland and Switzerland offer reinsurance providers stable tax arrangements and are becoming domiciles of choice, S&P said. Several Bermuda-based reinsurers have set up holding companies or subsidiaries in Ireland, including PartnerRe, XL Capital, Everest, Arch, Axis, Allied World and Alterra. Others have opened subsidiaries in Switzerland, such as Flagstone, Catlin and Amlin, S&P said. Luxemburg and the Netherlands are also creating interest among reinsurers.
Europe accounted for 60 percent of global net reinsurance premium written in 2009, and five of the six largest reinsurers–Hannover Re, Lloyd's, Munich Re, SCOR and Swiss Re–are in the region.
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