The London Market in general and Lloyd’s in particular has been having an ongoing debate for the last few years over the place Bermuda-based companies occupy in the overall market. Are they basically competitors, who steal business away from London? Or are they supplemental to its insurance activities, adding needed flexibility and capital?
Recent comments published on the Lloyd’s web site (www.lloyds.com) , incident to the Financial Services Authority’s (FSA) annual insurance sector conference, have come down on the side of the latter view. “The London market has never been in a better position, with competition from Bermuda likely to help it thrive,” was the overall consensus.
Stephen Catlin, Chairman of Lloyd’s insurer Catlin (the first Lloyd’s insurer to move its domicile to Bermuda some 10 years ago) stated: “London has the right time zones to speak to everyone. It has the business language of the world. There is no where in the world like it.”
Kiln became the latest London insurer to announce plans to move to Bermuda, following in the footsteps of Catlin and Hiscox. Catlin’s not worried. He pointed out that “Bermuda has a population of 75,000. Between 40,000 and 45,000 people in the town center are directly or indirectly involved in the insurance sector. There is no way it can grow further and compete with London.”
Dan Glazer, Managing Director of AIG, added: “Bermuda is often spoken about as an ‘either or’ situation. I view it for many firms as a place of specialization, particularly for catastrophe risks. But London has a real advantage over Bermuda – time. There is no better place to be than GMT to access the world.”
Catlin didn’t shy away from one of the major sticking points between the UK and Bermuda – tax rates. He said the problem should be addressed. “From a UK Limited’s point of view, it is a concern that the government needs to look at,” Catlin explained. “We all learned from the Thatcher era that if the corporate tax rate is reduced it can increase the overall take, and major businesses will come back to London.”
He indicated that, despite Chancellor of the Exchequer Gordon Brown’s proposal to cut the corporate tax rate by two percent to 28 percent, that’s still too high.
Clive Maxwell, Director of HM Treasury, told the conference that the government was fully aware that tax was a big issue in terms of a company deciding where to locate its business. He indicated that “we are talking to people in the industry with regard to these issues,” and plans to “report back in May.”
Bronek Masojada, Chief Executive of newly Bermuda domiciled Hiscox, indicated that “insurance is moving to a hedge fund structure. The hedge funds are based in Bermuda and the Cayman Islands, but all the highly paid skilled people are taxed and live in London and New York.”
Hector Sants, Managing Director of Wholesale at the FSA, believes the regulator is working hard to keep London at the top of the global insurance league table. He reminded that audience that, “we are very mindful that we are seeking to make London an attractive place to work, but attractiveness does not mean the lowest regulatory regime. We seek to deliver a high quality regulatory regime.”