US tax cuts will hit Bermuda re/insurers claims survey

12-02-2018

US tax cuts will hit Bermuda re/insurers claims survey

The recent US tax cuts, officially known as the Tax Cuts and Jobs Act of 2017, will have an impact on those re/insurers that are based on Bermuda, according to an exclusive survey of readers of Bermuda:Re+ILS.

We posed the question: “Will the recent US tax cuts have an impact on re/insurers that are based in Bermuda?” An overwhelming 82 percent of those who participated in the survey said that tax cuts would indeed have an impact, against just 18 percent who said that they would not.

One reader said that they had already seen significant reduction in internal premium flows, whilst another said that companies will no longer cede business from the US to Bermuda.

According to one participant in the wake of the tax cuts the US domiciled companies will now become much more competitive, particularly on longer tail lines of insurance.

Another reader said that some of those companies that had operations in both the US and Bermuda might see the latter consolidated into the US side of the business.

One reader was more blunt, saying that: “Some reinsurers are in Bermuda solely for the tax-avoidance. The incentive to do that anymore will either go away completely or be significantly reduced. Those reinsurers will go into runoff or scale back. The other reinsurers--those who do reinsurance as a core business--should be mostly unaffected.”

One respondent stated that the changed "costing" of products sold in the US will impact all players.

According to yet another reader the impact of the tax cuts on re/insurers in Bermuda will not necessarily be all negative, and there are other options available, such as passive foreign investment companies and affiliated reinsurance companies.

Finally, one last reader went into some detail: “I expect fewer new reinsurers will set up in Bermuda. Over time, some of the senior management and others might relocate to [the] US or Canada and potentially full underwriting teams as well. This could be due to the lessening of the Bermuda tax advantage, as well as the high costs [of living] in Bermuda and the socio-economic and political environment in Bermuda.”

Bermuda, US, tax cuts, Trump, readers, survey, business, premium

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