Reinsurers turning eye away from Bermuda, to Europe for domiciles

Global reinsurers are shifting their domiciles from Bermuda back to Europe, particularly to Ireland and Switzerland, reports Standard & Poor’s (S&P’s).
From the mid-1990s through 2007, Bermuda was the location of choice for reinsurers to establish new business. But the number of reinsurers moving to set up business in Europe has increased in the past few years, S&P’s said in its report, Choosing a Domicile Remains a Hot Topic For Global Reinsurers. [www.standardandpoors.com/general/generalsearch/en/us/?search=reinsurance+domiciles.]
Europe accounted for 60% of global net reinsurance in 2009, S&P’s observed.
The report cites two factors increasing the attractiveness of European countries as reinsurance domiciles. They include:
•recent regulatory changes in Europe related to Solvency II and
•concerns about potential changes in Bermuda’s status with regard to U.S. tax legislation.
“Some reinsurance management teams are starting to look at Europe as potentially offering a more sophisticated regulatory environment based on planned changes in that region related to Solvency II,” the report says. This is in spite of recent measures taken by Bermuda’s regulator to strengthen its oversight of the Bermuda market.
Also, there is the long arm of the U.S. taxman.
“The prospect of taxation for U.S.-sourced business written either directly by a Bermuda-based subsidiary or indirectly by a U.S.-based operating subsidiary with significant quota-share arrangements back to Bermuda could jeopardize Bermuda’s position as the domicile of choice,” the report says.
In contrast, some European countries, such as Switzerland and Ireland, offer relatively stable tax arrangements, including long-held tax treaties with the U.S.