Leading Insurer Leaves London For Low-Tax Bermuda

by Amanda Banks, Tax-News.com, London

13 September 2006

Robert Hiscox, chairman of London-listed reinsurer Hiscox Plc, has announced that the company is transplanting the majority of its operations to Bermuda in order to take advantage of the jurisdiction's low taxation and light regulatory touch.

According to Mr Hiscox, the UK government's over-zealous attitude towards taxation and regulation, in addition to increasing interference in the market by the European Union, is forcing increasing numbers of London insurers to consider jumping ship and setting up offshore

“They’re throwing regulation at us the whole time and then you’ve got Brussels putting its oar in on top of that,” Hiscox commented in a Times report, as the company announced its interim results.

Although London is the traditional hub of the global insurance market, its 30% corporate tax rate looks ever more unattractive when compared to Bermuda's 0% rate. Moreover, Hiscox pointed out in an interview with the UK's Independent newspaper that the ease of doing business in Bermuda meant that substantially more money was raised there than in London following last year's active Atlantic hurricane season.

"Investors like [Bermuda's] combination of swift bureaucracy and low tax," he observed.

The UK is coming under increasing pressure to re-examine its tax and regulatory structure for the insurance industry after Lord Levene, chairman of Lloyds of London, called upon the government to make London more competitive, in a speech in the city last week.

Bermuda is now the third largest centre for insurance after London and New York.

Under Hiscox's plans, the company will delist from the FTSE 250, and will be replaced by a company called New Hiscox Bermuda, in which the firm's shareholders will receive equivalent shares. Hiscox said that the move could drive the insurer’s tax rate down to about 11%.

With offices in 10 countries, Hiscox currently has a market value of GBP880 million, and annual sales income of GBP1.2 billion.

The company announced a 30% drop in half-year profits to GBP61.3 million.

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