Fitch: Bermuda advantages to be challenged by global tax – The Royal Gazette | Bermuda News, Business, Sports, Events, & Community

Log In

Reset Password
BERMUDA | RSS PODCAST

Fitch: Bermuda advantages to be challenged by global tax

The multilateral agreement to establish a global minimum tax is expected to have a negative effect on Bermuda, according to a leading ratings agency.

In a review of the eight reinsurers followed by Fitch Ratings, the agency states that Bermuda’s advantageous tax status will be reduced at the margin, under the multilateral agreement to establish a 15 per cent global minimum tax rate under Pillar Two of the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS).

Fitch added that near-term rating actions for Bermuda (re)insurers are not expected as a result of the agreement, although long-term implications remain to be seen.

Meanwhile, the Bermuda 2022 Market Update also says Bermuda (re)insurers should return to underwriting profitability in 2021, as combined ratio improvement and continued premium rate increases more than offset increased catastrophic losses.

Fitch expects pricing to continue to rise but at a declining rate for (re)insurers through midyear 2022 renewals, with continued material differentiation based on loss experience. Market pricing increased at the January 2022 reinsurance renewal, sustaining the overall rate rises that have continued since early 2018.

The report says the 2022 fundamental sector outlook for global reinsurance is improving, while the sector outlook on US property/casualty insurance is neutral.

The improving outlook for global reinsurers reflects better expected financial performance from higher prices in a hardening market environment and a strong economic recovery, depending on the evolution of coronavirus variants.

The hardening market is supported by heightened catastrophe losses, climate-risk concerns, continued record low interest yields and deteriorating loss-cost trends, as well as rising economic and social inflation, declining casualty reserve adequacy and growing cyber claims.

The 2021 full-year combined ratio for the eight (re)insurers that Fitch actively follows will be slightly below the 99.1 per cent posted through 9M21 and down from the 103.4 per cent in 2020.

Global (re)insurance catastrophe losses were $120 billion in 2021, up from $82 billion in 2020 according to Munich Re’s NatCatSERVICE.

Catastrophe losses will represent 13-14 points on the 2021 combined ratio compared to 13.6 points of catastrophe (6.7 points)/coronavirus (6.9 points) losses in 2020.

A restaurateur inspects flooding damage in Spain’s northeastern seaside town of Alcanar September 2. European flash floods, together with Hurricane Ida in the US, helped to make 2021 one of the most expensive years for natural disasters. Reinsurance company Munich Re said last week that overall economic losses from natural disasters worldwide last year reached $280 billion. (Photograph by Joan Mateu Parra/AP)

You must be Registered or to post comment or to vote.

Published January 19, 2022 at 7:53 am (Updated January 19, 2022 at 7:53 am)

Fitch: Bermuda advantages to be challenged by global tax

What you
Need to
Know
1. For a smooth experience with our commenting system we recommend that you use Internet Explorer 10 or higher, Firefox or Chrome Browsers. Additionally please clear both your browser's cache and cookies - How do I clear my cache and cookies?
2. Please respect the use of this community forum and its users.
3. Any poster that insults, threatens or verbally abuses another member, uses defamatory language, or deliberately disrupts discussions will be banned.
4. Users who violate the Terms of Service or any commenting rules will be banned.
5. Please stay on topic. "Trolling" to incite emotional responses and disrupt conversations will be deleted.
6. To understand further what is and isn't allowed and the actions we may take, please read our Terms of Service
7. To report breaches of the Terms of Service use the flag icon