Bermuda lacks ‘underwriting common sense’, claims report
Bermuda’s lack of double taxation treaties and local underwriters missing “common sense” modelling judgment are just two challenges faced by the Island’s insurance market.
This, according to online news publication
Insurance Day, in an in-depth feature on Bermuda’s re/insurance industry this week, compiled from information gathered by market research firm, Axco.
While the article lauds Bermuda as a “global place of importance”, some of the familiar subjects are listed as threats to the Island’s reputation, including work permit concerns and the quest for independence from the UK.
A new challenge was cited, however, including refusal by underwriters in Bermuda to operate on a slip basis as does the London marketplace, which, according to the article, makes the Island less efficient than London.
“Although Bermuda led the world in the use of computer modelling, there has been recognition some underwriters followed their models blindly and lack the experience and common sense to exercise old-fashioned underwriting judgment…,” the article reads.
The article also claims that, as a whole, Bermuda’s underwriting reputation is considered guarded.
“The more innovative insurance vehicles aside, Bermuda is regarded as being rather conservative and will reportedly decline business more readily than London market underwriters,” it said.
The article touts Bermuda’s regulatory flexibility and the ease with which to set up a company on the Island as reasons for its continued success as a global leader but states that Bermuda’s lack of double taxation treaties, particularly with US and Europe, as a reason for “some recent departures to different domiciles”.
Many nations have made bilateral double taxation agreements with each other to avoid paying tax on gain where the entity resides and paying again in the country in which the gain was made.
Bermuda has signed 31 Tax Information Exchange Agreements (TIEA), of which 15 are with G20 member countries and one Double Tax Agreement with Bahrain. Canadian tax law (separate from Bermuda’s TIEA), however, allows subsidiaries of Canadian companies that are resident in Bermuda the right to repatriate certain profits to their Canadian parents without being taxed in Canada.
That effectively gives Bermuda a benefit normally reserved for countries that have a double-tax treaty with Canada, such as Barbados.
More familiar challenges for Bermuda are also listed, including the Island’s work permit policy.
“Bermuda is a small island with limited supplies of office space, housing and skilled local personnel,” the article read. “One especially frustrating issue for exempt companies is the question of work permits.”
Another challenge listed is Bermuda’s interest in gaining independence from the UK.
“Independence would greatly increase the costs of public administration, however, and any increase in the tax burden, such as the imposition of income tax, would start to erode the Island’s competitiveness as a domicile.”
The article stated, though, that independence “would not be fatal to the international business community” provided the legal system here retained a right of appeal to the UK Privy Council.