corporations. The OECD BEPS work may lead to rules determining how business is done, where management decisions are made and whether de facto ‘permanent establishments’ exist—all leading to potentially new and higher tax liabilities.


The measures, including the recent Indonesian proposal and the existing Argentinian law, are sometimes proposed as ways to build up domestic cash resources by minimising foreign currency outflows. The Argentine experiment is being challenged at the World Trade Organization as a violation of the country’s free trade commitments. Anecdotal evidence exists that at the local level multiple insurers have become threatened due to mismatches between their capital and the risk they have assumed as a consequence of government policy.


3. Low tax jurisdiction trade restrictions


From time to time jurisdictions impose withholding taxes on cross- border transactions which sweep in reinsurance, or place restrictions on the amount of risk that can be placed with reinsurers in low tax jurisdictions. France and Belgium are recent examples of the withholding tax problem. The French provision was subsequently changed to remove the restriction on Bermuda. The change was made after the French government concluded that Bermuda met its standards for cooperation on tax law enforcement.


Bermuda’s compliance with the ever-evolving OECD standards is vital to Bermuda’s standing as an exemplary partner in tax law enforcement and cooperation. Bermuda is legally bound to help all developed economies enforce their tax laws with regard to corporations located in Bermuda, but the Belgian provision remains in place.


Bermuda’s ‘know your customer’ rules date back more than 70


years, indicating leadership in the collection of beneficial ownership information—something several of the world’s leading economies have been unable to do.


Mexico is a positive example of keeping cross-border markets open. Mexico recognises that because of Bermuda’s record on tax law disclosure, compliance and cooperation, restrictions on cross-border cessions should not be applied to Bermuda.


4. OECD base erosion and profit shifting (BEPS)


This G20-directed OECD project is targeted at multinational corporations with a goal of taxing income earned in jurisdictions where business is conducted. There are enormous implications for multinational


22 Bermuda Finance | 2014


The focus is on intangible or intellectual property (IP), but the fear is that precedents set might affect insurance business transactions. Insurance and reinsurance have historically been taxed where the underwriting and related profits are earned, not where the policyholder resides. We work with the GFIA and individual members on materials necessary to educate policymakers on the potentially counterproductive consequences of sweeping insurance into tax regulations designed to regulate IP.


Reinsurance is easily distinguished from IP since actual risk is transferred and multiple levels of regulation already exist to govern the use of affiliate and non affiliate reinsurance.


As a trade association representing Bermuda’s property and casualty commercial insurers and reinsurers our budget is directed almost entirely to public policy issues. The challenge is to translate the science of insurance risk diversification into language that policymakers can understand. We do this through presentations, media interviews, speeches, material on issues and yes, even Twitter (follow us at @ ABIR_Bermuda).


If we do this successfully, policymakers will understand that the risk management decisions ABIR members make lead to more competitive insurance markets, lower prices and more choices for consumers. Research from the Brattle Group and Dr. David Cummins remains central to making the point that pooling of risk helps make insurance more available and affordable.


Regulations or tax measures that interfere with this fundamental tenet of the insurance business are contrary to the best interests of insurance buyers, both commercial and personal. We continue to talk to academics about the need for further research and documentation about the benefits of cross-border and global risk diversification for global insurance consumers.


Further information: ABIR publishes much information at www.ABIR.bm


Te Coalition for Competitive Insurance Rates publishes its material at www.KeepInsuranceCompetitive.com


Material supporting moving insurance risk from government funds to the private


sector can be www.StrongerSaferFlorida.org


Brad Kading is president and executive director at the ABIR. He can be contacted at: bradley.kading@abir.bm


found at www.SmaſterSafer.org and


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