Bermuda tax proposal ‘manageable’ for insurers: Analysts

The proposed introduction of a corporate income tax by the government of Bermuda is “a modest but manageable negative” for insurers and reinsurers domiciled on the island, according to analysts at Keefe, Bruyette & Woods Inc.

Bermuda, which for years has not imposed a corporate income tax, on Tuesday said it was considering applying such a tax beginning in 2025 on Bermudian units of multinational corporation with $820 million or more in annual revenue. The move comes after a global minimum tax rate of 15% was brokered by the Organization for Economic Cooperation and Development.

Numerous insurers and reinsurers have established in Bermuda over the past 40 years, in part attracted by the island’s low taxes.

In a note, analysts at Baltimore-based KBW, led by Managing Director Meyer Shields, said the current hard reinsurance market will likely mitigate the effect of an income tax.

“In the near term, we think that reinsurers – especially for property catastrophe reinsurance – retain significant pricing power that would allow them to largely incorporate a Bermuda corporate income tax in pricing,” the analysts said.