
Bermuda voters driven by bread-and-butter issues as new tax takes effect
Bermuda’s voters go to the polls on February 18 with critical decisions to make over the future of the island – which may be unique in the world in that re/insurance is its primary economic driver.
Despite that, the industry is unlikely to play much of a role in the general election if the past is any guide, with issues such as the high cost of living, education and health dominating headlines.
But that does not mean re/insurance leaders will not be watching the election carefully, and the vote could be crucial in terms of the direction of the economy and its mainstay.
That re/insurance is critical to the island’s wellbeing is indisputable. International business contributed 29% or $2.4 billion to Bermuda’s GDP in 2023, with much of that growth coming from re/insurance, which grew in the period while other segments such as communications services declined.
The Association of Bermuda Insurers and Reinsurers estimated its members, who make up the bulk of the island’s property and casualty re/insurers, contributed a record $1.02 billion to the Bermuda economy while employing 2,140 people, of whom 67% were Bermudians, spouses of Bermudians or permanent residents.
ABIR also expects its members to pay the bulk of the Corporate Income Tax, which came into force this month.
Similar recent statistics for Bermuda International Long Term Insurers and Reinsurers (BILTIR) were not available, but a 2021 Economic Impact Report said the sector employed 594 people and contributed $500 million to GDP. Since then, the division has continued to grow, employing at least 627 people contributing $550 million to the economy, if not faster.
Bermuda’s other re/insurance segments – captives, insurance-linked securities and legacy – along with its support services such as law firms, accounting firms, information technology providers and more also contribute significantly to the economy.
It may be surprising that the segment’s role in the election is relatively low key but there is no doubt it is watching the outcome carefully.
On the major issue, the CIT, now in effect, so far there remain more questions than answers.
The office that will administer the tax has only just been set up, under the leadership of a veteran re/insurance tax expert, but issues about deferrals and tax credits are far from settled.
Still, that has not stopped the island’s politicians discussing how to use the revenue, which the Government estimates to average $750 million per year.
An effort by the Opposition One Bermuda Alliance to ring fence the money for reduction of the island’s near-$2 billion debt was rejected by the governing Progressive Labour Party (PLP) but those who will be paying the tax would like to see it used to reduce other taxes which hamper Bermuda’s competitiveness and also help to create more jobs.
Whether payroll taxes will be reduced is an open question, while others would like to see customs duty, which contributes to the island’s eyewatering retail prices, lowered.
David Burt, the Premier, (pictured) has indicated he would like to use some money in the first year to kickstart the island’s long-awaited health reforms, and would allocate $50 million to launch universal healthcare, improving hospital services and “expand access to preventive and specialist care”.
Government advisory board the Fiscal Responsibility Panel recommended that some revenues be put into a stabilisation fund which could be drawn down to “protect the budget against fluctuations in income and economic or other shocks”. It also suggested tax income could reduce unfunded liabilities in the government’s Contributory Pension Fund and other social insurance funds.
Both suggestions appeared to be politely brushed off by ministers.
Last month, Burt, also the finance minister, said in the annual pre-Budget report that he wanted to reduce taxes on energy, eliminate customs duty on building supplies, lower private car licensing fees and slash land tax rates.
But the OBA criticised this, noting the FRP had recommended the money be put in a holding account until the end of 2025 because the companies paying the tax could not be certain of their profits until after their year-ends, meaning the Government could not certain of what money it would receive until the 2026-27 financial year.
So far, the election campaign has not seen much more debate about the tax or international business generally.
Instead, there has been uproar from university students who have complained vigorously that they have been denied a vote because polling will take place when they are in their lectures.
Burt may have believed there was no real reason for concern for this, having called the last election in October 2020 when the island was still reeling from the Covid-19 pandemic, but the reaction has been vigorous and may put young people, who have recently been relatively strong supporters of the PLP, in play in this election.