Moody's analyst backs ABI proposals for tax reform
The UK tax regime may hamper the competitiveness of insurers, credit rating agency Moody’s has said following the publication of the ABI report, ‘UK competitiveness: the way forward for insurance’.
In the report, the ABI called for tax reform to prevent insurers from redomiciling to lower tax jurisdictions abroad and threatening UK competitiveness in the global marketplace.
Moody’s insurance analyst David Masters said: “There is some merit to a number of the ABI’s proposals … UK insurers’ international competitiveness may be partially impaired by the current regime.”
In recent years, a number of insurers and brokers such as Hiscox, Willis and Brit Insurance have moved to the low-tax domiciles of Bermuda, Ireland and the Netherlands respectively.
Chief executive of Hiscox Bermuda, Charles Dupplin, said: “UK corporate tax in the past 10 years has got very complicated, and each little complicated change has the effect of raising the net tax that we pay out. If you make it as unattractive as the UK has, then inevitably people will start moving their capital around.”
He added the UK’s unpredictable tax regime could jeopardise the status of the London market as a global insurance centre.
“They have really got to simplify and lower taxes to attract big international capital back. If they don’t do that, eventually London will become marginalised.”
However, Moody’s predicted the continuation of the current tax regime was unlikely to affect insurers’ credit quality or lead to a mass exodus to low tax havens in the immediate future.
“Insurance is still very much a people- and knowledge-based industry, and we consider the critical mass of the London insurance market to remain a key differentiator, which lessens to some degree the likelihood of insurers leaving the UK.”