Why do so many general insurance companies have operations/head quarters in Bermuda?

Question

I can understand why many GI companies would have operations in London due to Lloyd's, for example, but why Bermuda out of all places?

Answer 1

No idea, but I would guess it's one or more of the following:

- tax avoidance (quasi-legal stuff)

- foreign investment incentives from Bermuda

- plausible deniability/arm's reach from home country's legal system

Generally, the only reasons to do business outside of your locale are to "cheat" a system (legally or otherwise).  For example, Nike isn't employing third-world workers for their benefit, but in order to avoid paying local (North American) employees a fair wage.

Maybe Bermuda, in particular, because they hope their files will get mysteriously "lost", and then they won't have to pay out to claims?  :-D

Answer 2

The insurance companies domiciled in Bermuda are primarily reinsurers not general insurance companies. And they are not there to avoid legal obligations.

Fitch Ratings has released a new "Special Report" examining the state of Bermuda's insurance and reinsurance industry, which concludes that it "continues to develop as a thriving domicile for (re)insurance organizations, attributable to an attractive regulatory and tax environment, an accumulation of investment capital and underwriting talent, and innovative approaches to risk management."

Among the more significant conclusions contained in the study, Fitch notes that, although the "market has enjoyed this tremendous operating success in the past two years, Bermuda (re)insurers will face significant pressure on profitability going forward as property/casualty insurance pricing continues to trend steadily downward.