Briefing - How does Bermuda really work?

(From Reinsurance)

So why go to Bermuda?

Several new reinsurance ventures have been established in Bermuda over the past year, ranging from 'sidecars' of existing businesses to new operations set up by Amlin and Hiscox. The key development since the last major injection of capital following 9/11 is that a significant proportion of the most recent investment comes from hedge funds and venture capital trusts.

It is primarily the speed with which companies can be established to take advantage of market opportunities and available capital that gives the Atlantic island an edge over other reinsurance centres. A company can secure capital, obtain a licence and be up and running in as little as six weeks in Bermuda. The same process could take around nine months in the UK, and over a year in the US. Once there, potential tax benefits and competitive brokerage costs can make the island an especially cost-effective platform.

Another big advantage is that Bermuda's workforce - both citizens and expatriates - already offers a wealth of reinsurance experience and expertise. However, the available resources, market infrastructure and pool of talent are constrained by the relative size of the island (around 65,000 inhabitants and just over 50 square km of territory). Although new entrants are adding to the growing competition for suitable staff, outsourcing services are initially available to help companies get up and running. Another option followed recently by new venture Ariel Re is to take over the operational infrastructure of an established enterprise.

Companies may also, of course, wish to bring in staff from abroad. However, all posts need to be made available to suitably qualified local personnel. When seeking a work permit, employers will also need to explain why a particular position was offered to an incomer rather than an inhabitant. While this tends not to be an issue for the most senior executive positions, it can affect more junior posts. Potential incomers also need to take into account the limited availability of housing, schooling and health care. Indeed, the number of school-age children of an applicant can sometimes prove a factor in judging work permit applications.

What exactly is the tax position in Bermuda?