It took surprisingly long for Bermudian officials to rise to the bait, but the “tug-of-war” over Bermuda’s lucrative reinsurance industry is officially on, according to this leader in the Bermuda Gazette.
What remains to be seen is whether Bermuda’s “fight” will be rhetorical or substantive. In other words, will the fight take the form of defensive comments like those quoted in the Gazette piece, or will the comments be backed with policy changes to make life easier for Bermuda reinsurance companies?
Whilst the former will be of limited efficacy, the latter may be politically, or fiscally impossible.
The main gripes from “International Business Companies” are high costs (housing allowances and payroll tax) and immigration restrictions.
There is nothing that can be done about the high cost of living, which necessitates housing allowances to staff at nearly all levels (which can and often do reach six figures per annum for senior staff).
As I pointed out in my last blog, with Bermuda’s expenditure (as reported by the Auditor General and cited in this opinion piece in the Bermuda Sun) exceeding revenue by more than US$300m, and payroll tax from ABIR members alone totaling US$98,000,000 in 2009 (according to the much-cited ABIR press release), tax concessions seem out of the question. At the same time as being fiscally imprudent it would be grossly unfair (and therefore politically impossible) for any concession to carve out the reinsurance sector.
As for immigration concessions, Premier Cox needs to walk a fine line between protecting the reinsurance companies’ ability to conduct business and the perceived employment rights of Bermudians. Bermudians may perceive this as a zero sum game: lighten the restrictions and disenfranchise Bermudians.
Ms. Cox’s comments about Cayman not having sufficient human capital for reinsurance companies ring hollow as much of the human capital is mobile – precisely the point the IB community and their advocates have been making. The fact that Cayman lacks the local expertise may be seen as a good thing by the industry because work permits for any position requiring experience will surely be a rubber stamp.
It will be interesting to see if Cayman fires back.