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.”
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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