As of 30th September 2010, Allied World Assurance, an integral part of Bermuda’s insurance and reinsurance industry, announced plans to redomesticate (i.e. move corporate headquarters) from Bermuda to Geneva, Switzerland. Plans were subsequently ratified unanimously by the entire Allied World Board of Directors.

The Big Move

Allied World Assurance was formed in 2001 and became an internationally renowned industry leader. Scott Carmilani, President and CEO of the organisation, feels that despite the prestige and reputation of Allied World could be fatal. “We are announcing our proposed redomestication to Switzerland as we believe the time has come to increase our focus on global distribution as well as global product capabilities…This redomestication will allow us better manage our position in local markets around the world and continue to maintain a strong presence in the Bermuda market.”

Approaching its tenth year in operation, Allied World has grown from a single office in Bermuda to 16 worldwide locations. Yet, its global presence is not significant enough to protect its headquarters.

The redomestication is expected to be completed by the end of the 2010 calendar year. However, according to several company executives, senior-level directors who will be relocating immediately will only feel initial impacts. It’s anticipated that further staff impacts will take at least 18 months.

The Aftermath

According to Jason Rhodes and Myles Neligan in the Reuters article ‘Analysis – Swiss promise lures Bermudan reinsurers’ dated October 8th 2010, Switzerland and other domiciles are starting to threaten Bermuda’s status as Re/Insurance Hub. Worries over U.S. measures to limit Bermuda’s tax advantage and strict new capital rules in Europe are considered to be the main rationale behind this. As a result, Dublin, Luxembourg and Geneva are likely to be the biggest beneficiaries.

This isn’t the first example of an Offshore company leaving its Offshore origins. In May, Amlin relocated its Bermudian-based reinsurance unit to Zurich. Two years ago, Ace redomiciled to Switzerland from the Cayman Islands. Additionally, XL Group moved to Dublin from Grand Cayman, and Flagstone Re switched from Bermuda to Luxembourg.

The Growing Re/Insurance Market

According to Rhodes and Neligan, the growing Re/Insurance market in Europe could be behind plans to redomicile. However, analysts are claiming that the EU’s Solvency II Capital Regime further increases the need to redomicile. On a positive note, Bermuda’s regulator, the Bermuda Monetary Authority, is rushing through plans to implement Solvency II, plans which are likely to be completed by the end of 2010. This is hoped will avoid a potential ‘mass exodus of reinsurers’. At this stage, the Organisation for Economic Cooperation and Development’s latest report suggests that Bermuda is leaving the Cayman Islands behind with its legal and regulatory infrastructure to achieve international tax transparency standards.

The question that still needs to be answered is whether this is a worrying ongoing trend or simply a minor blip to the Offshore Industry. Do Offshore historical hubs like Grand Cayman, Bermuda, British Virgin Islands and the Channel Islands have what it takes to retain businesses and funds or are newer, more fashionable domiciles like Geneva, Luxembourg, or Dublin set to take over?

On a closing note, Sebastien Kafetz, an insurance specialist at Lloyds Banking Group, said ‘I think a gradual erosion is probably true, but it won’t be a big bang. You’re seeing people move their capital to Europe, but as a market place Bermuda has still very much got the cluster effect; people are still growing their operations there.’

Are you searching for a Re/Insurance role in Bermuda or other offshore jurisdictions? CML Recruitment is the place for you – reach out to a member of our team at info@cml.ky today for a confidential conversation.