Bermuda’s tax policy is once again in the spotlight after a new AM Best report showed that global reinsurers paid more in taxes last year, partly because of changes linked to the island.

According to the report, the Bermuda Ministry of Finance allowed companies to create deferred tax asset accounts in 2023. That one-time move gave reinsurers a major tax break, lowering their income taxes and boosting profits. When that benefit expired in 2024, effective tax rates went back up.

The result was clear in the industry’s numbers. Return on equity for the world’s top 25 reinsurers dropped from 22 per cent in 2023 to 17 per cent in 2024. Analysts said the higher tax burden was one of the main reasons for the decline, even though underwriting and investment income stayed strong.

“In 2024, without the benefit of lower taxes as in 2023, the tax component was a drag on ROE,” the report stated. When the Bermuda tax benefit expired, “global reinsurers faced a higher overall tax rate in 2024”.

The DTA accounts are still providing some relief, as they can be used to offset income taxes over the next ten to 15 years. But AM Best noted that the benefit is smaller now, meaning reinsurers with large Bermuda operations are once again facing heavier tax bills.