Bermuda finalises exchange agreement

By added on 10/07/2009

Bermuda has finalised a bilateral tax information exchange agreement with the Netherlands, bringing its total number of such agreements to 12, the required threshold for the country's removal from the OECD is grey list of tax havens.

This development has no direct rating implications for Bermuda-domiciled insurers or reinsurers, but the promotion of Bermuda to the OECD is white list removes some uncertainty regarding the island's ability to maintain its position as a key global insurance and reinsurance hub.

If Bermuda had not complied, there may have been some deterioration in business prospects over time, and therefore, risks to creditors, as the international community might create obstacles to "offshore" reinsurers.

Institutional investors have also felt severe pressure not to buy structures issued by SPVs on the OECD "grey list", which could create problems for these offshore jurisdictions.

The renewed emphasis among the G-20 countries on targeting tax evasion and avoidance made possible by the existence of tax havens could result in significant adverse economic consequences for jurisdictions that remain noncompliant with OECD guidelines.

Recently, there have been proposals to change the U.S. tax code to target the tax treatment of reinsurance on U.S. affiliate-sourced business by offshore-based insurance and reinsurance groups, particularly those located in designated tax havens.