S&P Examines Reinsurers Reconsideration of Domicile Decisions

September 9, 2010

Global reinsurance companies are reconsidering their choices of corporate domicile, according to a new report from Standard & Poor’s Ratings Services, titled “Choosing A Domicile Remains A Hot Topic For Global Reinsurers.”

S&P notes that the “choice of domicile–which can have significant regulatory and tax implications–has always been paramount. While the U.S. remains an important market, Europe and Bermuda continue to vie for the top spot among reinsurers that are launching their businesses or considering a change of address.”

Credit analyst Laline Carvalho explained: “From the mid-to-late 1990s through 2007, Bermuda was the location of choice for reinsurers that were setting up new businesses. Start-up activity on the island was particularly strong in 2001 to 2002 following the Sept. 11, 2001, terrorist attacks, as well as in 2005 to 2006 after Hurricanes Katrina, Rita, and Wilma.”

“Demand for reinsurance increased substantially during those times, and Bermuda–which offered relatively quick regulatory approval to begin operations, favorable tax laws, and proximity to the U.S.–proved an attractive place for reinsurance companies.

“However, the number of reinsurers, many of which offer a combination of insurance and reinsurance products, that are moving to establish their business in Europe has risen over the past few years,” she continued. “Europe historically has been home to some of the largest and most well-established reinsurers in the world. And though Bermuda had gained prominence as a domicile of choice, we are now seeing a significant shift back toward Europe.”

S&P noted that “Europe accounted for 60 percent of global net reinsurance premiums written in 2009, and five of the six largest and longest-standing global reinsurance writers–Hannover Re, Lloyd’s, Munich Re, SCOR, and Swiss Re–are based in the region. Proposed regulatory and taxation-related changes in different parts of the world are sparking a renewed interest in Europe, particularly Ireland and Switzerland.”

The report is available to RatingsDirect subscribers on the Global Credit Portal at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor’s public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.

Source: Standard & Poor’s

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