Market suffering competition from tax havens

Lloyd's has increased pressure on the government to introduce a more favourable tax regime that will make the insurance market more competitive worldwide.

The market is facing increasing competition from other markets, such as Bermuda, which have advantages in terms of tax, cost and regulation issues.

To tackle this competition, Lloyd's has said that by the end of 2006 it would have recommendations in place "for temporary capital solutions and tax efficient structures".

A Lloyd's spokesman admitted that UK insurers and reinsurers were competing in global markets at a disadvantage compared to places such as Bermuda and Dublin, where tax rates were much lower.

The spokesman said: "In common with other UK insurers, we have drawn this and the danger that it poses to the UK economy to the attention of the government, and are urging it to be sensitive to it."

Andrew Hubbard, partner with consultancy Mazars, said that although the government needed to do something about "making the UK less uncompetitive than other markets", the real issue was the burden and cost of FSA regulation.

But Lloyd's deputy chairman and Hiscox chief executive Bronek Masojada insisted that before Lloyd's asked the government and the FSA to implement change, the market needed to improve its own processes to become more efficient.

The job of leading Lloyd's lobbying at government levels lies with chairman Lord Levene and the yet-to-be-appointed chief executive.

In recent months, Levene has been vocal on the responsibility of "governments and regulators to level the global playing field" in the US reinsurance market.

Nigel Hanbury, managing director of Lloyd's members' agent Hampden Private Capital, said he would support any move by Lord Levene to tackle issues which make the insurance market fairer for Lloyd's.