The new corporate income tax is not expected to affect Bermuda’s standing as a major reinsurance hub, according to an article in S&P Global.

The 15 per cent tax will apply to multinational enterprises with revenues of €750 million (about $827 million) or more, with the first payments due to be made in 2025.

“At the margin, there may be some shift of business to different jurisdictions,” said Douglas Baker, a director at Fitch Ratings, in the article.

He added: “But I think by and large, the companies that are in Bermuda and focused on Bermuda, will likely remain that way.”

While the island’s lack of corporate income tax may have been a lure for start-ups initially, the established regulatory framework, solvency regime and pool of insurance expertise are equal, if not greater attractions, said the article.

“Bermuda is going to remain a sophisticated regulatory regime with a good amount of talent on the island in the insurance space. And that coupled with the fact that it’s a reciprocal jurisdiction to the US as well,” Mr Baker said.

The article said that the island’s insurance market had already weathered a potentially bigger tax-related challenge following the introduction of the Tax Cuts and Jobs Act 2017 in the US, which cut the US corporate tax rate to 21 per cent from 35 per cent.

It also introduced the Base Erosion and Anti-Abuse Tax — a minimum tax level on profits US-based companies move to affiliated offshore companies in a bid to reduce their tax bill and which includes US-based insurers ceding business to affiliated offshore reinsurers.

For those that are now paying US taxes, either through the Beat or by setting up a US-taxable subsidiary, the new Bermuda tax will be “somewhat of a wash”, Mr Baker was quoted as saying.

With the US-Bermuda tax benefits already reduced by the TCJA, there is now more emphasis on Bermuda's other attractions.

Mr Baker added in the article: “The tax impact is somewhat muted in the face of the other benefits, particularly the more economic reserving framework relative to US statutory accounting.

“I think that will continue to be a primary driver of companies looking at Bermuda.”

The CIT will end Bermuda’s zero corporate tax rate, but companies said they did not see that as a key attraction.

“Tax optimisation is not really the core strategy of Convex," Paul Brand, chief executive of Convex, said in an interview in September 2023, shortly after the Government had published its first consultation on the planned tax change.

“We like being in Bermuda because we think it's well regulated. We like being in Bermuda because it's a core market for reinsurance business. Those things won't change because we're paying corporation tax or not,” he added.