Flagstone Reinsurance Holdings Ltd. plans to move its holding company from Bermuda to Luxembourg, as it seeks to establish its identity as a European company.

The move will have no impact on its underwriting operations in Bermuda, where the company will continue to employ 55 people in its Church Street, Hamilton offices, Flagstone chief executive officer David Brown told The Royal Gazette.

In an interview yesterday, Mr. Brown said: "There will be no change in what people do here, or in terms of their roles, just like when we moved the operating company."

Flagstone merged its Bermuda operating company into its Swiss unit in 2008, making the Island platform a branch of Flagstone Reassurance Suisse.

The CEO added that he would continue to be based on the Island.

Flagstone added in a statement released yesterday: "Flagstone will continue to maintain underwriting and executive offices in Bermuda and recognises the important role that Bermuda plays in the global reinsurance market."

Flagstone is the third major player in the Bermuda re/insurance market to switch its place of incorporation to Europe, after Ace Ltd. redomiciled to Switzerland in 2008 and XL Capital Ltd. announced plans early this year to move its holding company to Ireland.

The difference is that neither Ace nor XL were ever incorporated in Bermuda, instead having originally established their holding companies in the Cayman Islands.

Mr. Brown said he expected more Bermuda companies to follow suit. "I think it will happen, particularly with Solvency II coming for operating companies," he added.

Solvency II is the name given to enhanced insurance regulations in the European Union, due to take effect in 2012. Bermuda's insurance regulator, the Bermuda Monetary Authority, intends to achieve "mutual recognition" — that is, recognised as having regulatory equivalence with Solvency II — to ensure that Bermuda companies doing business in the EU will not be competitively disadvantaged.

Mr. Brown said Solvency II was not a factor in Flagstone's move to Luxembourg, as its operating companies were already headquartered in Switzerland, which had largely achieved regulatory equivalence.

But more corporate restructuring in the Bermuda market would not necessarily harm business on the Island, Mr. Brown added.

"What I would emphasise is that what drives Bermuda's economy is not where companies are domiciled, but where the business is done," he added.

"Bermuda has a very large re/insurance market and, as long as people keep doing business here, that will remain so."

His comments echo those of Flagstone chairman Mark Byrne at the Bermuda Reinsurance Club conference last week.

Having said that he was aware of many companies considering redomestication of their holding companies, Mr. Byrne added: "What Bermuda cares about is that there are still brokers getting off airplanes, looking to place submissions. It makes no difference if they are doing business with a Swiss company or a Cayman company."

In a statement released by Flagstone yesterday, Mr. Byrne said: "We are proud of our unique global business and this change, which results in our holding and principal operating companies being in Europe, settles our identity as a European company with a substantial and important branch in the thriving Bermuda market."

He added: "Luxembourg has a network of excellent relations with major developed and developing countries around the world. And, in addition to our listing on the New York Stock Exchange, this change in incorporation has the potential to make a listing of our common shares on a European exchange more attractive."

Mr. Brown said: "Luxembourg is a major financial centre known for its stability as well as its financial sophistication, and we believe this move will increase our strategic and capital flexibility while maintaining our operating model and our long-term strategy."

Subject to regulatory approvals, Flagstone expects the redomestication to take place over several months following shareholder approval.

The company does not expect the redomestication to have any material change on its operations or financial results.

Flagstone was one of the Class of 2005 reinsurers, founded in the wake of Hurricane Katrina to respond to an increased demand for reinsurance capacity.

It has grown and diversified from its original model as a reinsurer of short-tail risk and now has offices in 10 countries, including Luxembourg, from where it carries out investment management.

The existing Luxembourg office will now become Flagstone's holding company office.

The company will continue to trade on the New York Stock Exchange and the Bermuda Stock Exchange.