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Bermuda Remains A Global Hub For P&C Re/insurance: S&P

Bermuda Remains A Global Hub For P&C Re/insurance: S&P

Bermuda Remains A Global Hub For P&C Re/insurance: S&P

Bermuda Remains A Global Hub For P&C Re/insurance: S&P

A new note from S&P says that Bermuda has become a global financial hub for property/casualty re/insurance, with a growing presence in life re/insurance.

According to the company, this occurred as a result of the volume of linked premiums written by Bermudan re/insurers. Based on net reinsurance premiums written, Bermuda’s market share in the worldwide reinsurance market varied between 7% and 9% throughout the course of the previous five years, according to S&P Global Ratings. The country continues to be a desirable location for sidecars, alternative capital structures, collateralized reinsurance, insurance-linked securities, and structured solutions for legacy business.

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S&P wrote: “Over the past few decades, Bermuda has also become the domicile of choice for global re/insurance start-ups. The territory offers adaptable legislation and regulation, tax efficiency, established infrastructure, and proximity to the U.S., the largest re/insurance market in the world. It also benefits from institutional stability and its track record of implementing reforms to ensure sustainable public finances and economic growth over the long term.”

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Bermuda Remains A Global Hub For P&C Re/insurance: S&P

According to S&P Global Ratings, despite a sizable economic contraction of 6.9% in 2020, real GDP increased an estimated 1.9% in 2021 and will grow by 3.2% in 2022. This would lead to GDP per capita of about $119,920 in 2022. It said that the international financial services sector represented about 27.5% of Bermuda’s GDP in 2020, much larger than tourism’s share (typically about 5% of GDP), and has remained resilient in the past few years.

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It also said that the tax regime in Bermuda could be evolving with proposals regarding a global minimum tax under the Organization for Economic Cooperation and Development (OECD) Pillar 2 and the U.S. passive foreign investment company regime. In December 2021, the OECD published detailed rules to assist in the implementation of a landmark reform to the international tax system, which will ensure multinational enterprises will be subject to a minimum 15% tax rate from 2023. The minimum tax will apply to multinational enterprises with revenue above €750m.

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Bermuda Remains A Global Hub For P&C Re/insurance: S&P

It added: “We believe this minimum corporate tax rate could affect Bermudian re/insurers, whose corporate income tax rate could jump to 15% from 0%, reducing their profits. However, based on our conversations with some re/insurance executives on the island, the Bermudian authorities could possibly lower the payroll tax as a potential offset.”


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IBEH C. JOE

Financial analyst, Entrepreneur, Blogger and Business model

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