Bermuda Insurance Industry Is Booming

by Mike Godfrey, Tax-News.com, New York

13 June 2002

Bermuda's insurance industry had a record year in 2001, despite the events of September 11th, and reports suggest that rapid growth has continued in 2002. There were 109 new incorporations of international insurers during 2001, 16% up on the year before, and taking the total number of international insurers to 1,602 at the end of the year. In a year which saw some recovery in the insurance market generally, gross premiums shot up 25% to more than $38bn, while total assets rose 11% to $146bn.

2001 also saw improvements in Bermuda's insurance regulatory regime following some criticisms contained in consultant KPMG's report on the UK's dependent territories, which was issued in late 2000. Until 2001, registration of insurance companies fell under the Registrar of Companies, who reported to the Minister of Finance, and the Finance Ministry was itself responsible for insurance supervision. However, KPMG felt there was a conflict of interest inherent in this system, and recommended that supervision of insurance should be independent of Government.

Bermuda responded to KPMG's recommendations by amending the the Insurance Act in two stages. Firstly the position of the Supervisor of Insurance was created in early 2001; then, as from January 1, 2002 full responsibility for regulating the insurance industry was moved from the Minister of Finance to the Bermuda Monetary Authority.

The recent attempts in the US Congress to punish companies which relocate to Bermuda in order to save tax had their origins in the insurance industry, as mainstream insurance companies began to follow the trail blazed a decade before by captives. Some American insurance companies have felt unable to move to Bermuda because of the tax consequences of the actual move (a company with a large onshore asset base is taxed on the expropriation of this base), and complained to Congress that they were disadvantaged in competing against their more nimble peers.

Of course, attention has now shifted to non-insurance companies such as the unfortunate Stanley Works; probably that's helpful for insurers, since their special case will get lost in the general furore which is by now so extreme that it is unlikely to result in legislation.

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