27 January 2010
Published in: Regulation - supervision, Accounting - tax
Tax changes needed to stop more insurers leaving UK
A more competitive and business friendly environment is needed to ensure the UK does not lose more insurance firms based here, the ABI has warned.
It comes as new figures showed insurers paid only 8.4% less corporation tax in 2008/09 than the previous tax year, against a 39% fall for the financial services sector as a whole in the same period. Despite this fall, the ABI says insurance firms still pay the fourth highest corporation tax of any sector. In total, the insurance industry contributes £8.2bn to the UK Exchequer.
Peter Vipond, director of financial regulation and taxation at the ABI, said: "The real danger for UK plc is insurers deciding to locate away from the UK. This is not just about who offers the lowest tax rate, though that remains an important factor. Financial centres, such as the Netherlands, Ireland and Hong Kong, have emphasized their friendly attitude to business. Just as importantly they offer stability in their tax systems over the medium term. The UK cannot afford to stand still as other financial centres become more attractive."
He added: "Insurance is one of the few sectors where the UK is a world leading player, and a more competitive environment could lead to the sector growing strongly."
Solvency II, which will change the way insurers are regulated across the EU, will make it easier for insurance companies to re-locate within Europe and the global clampdown on tax havens means insurers from non-EU jurisdictions may be looking for new homes.
On 13 January 2010, XL Capital, based in the Cayman Islands, announced it was moving its legal domicile from Bermuda to Ireland rather than the UK.
The ABI noted that UK insurers Hiscox, Omega Insurance Holdings, Kiln, Hardy Underwriting Bermuda, Beazley and Brit Insurance Holdings have all relocated to Bermuda, Ireland or the Netherlands in the past 3-4 years.