U.K. Insurer Group Calls for Efforts to Spur Competitiveness

The U.K. government must improve the competitive position of insurers if it is to keep them from moving to other jurisdictions, according to a survey released by the Association of British Insurers.

Four-fifths of senior U.K. insurance executives say that a failure to make the country more competitive could drive insurers overseas, the ABI said. Almost two-thirds say that the level of personal taxation in the United Kingdom has made them consider working abroad.

The report was titled "UK Competitiveness," which the ABI described as a "blueprint to maintain competitiveness." It follows the July publication of "Vision for the Insurance Industry in 2020." That document charted a strategy aimed at making the United Kingdom "the leading global insurance center" by 2020 (BestWire, July 29, 2009).

"The U.K. cannot afford to wait for a return to economic health to act," said Stephen Haddrill, the ABI?s director general, in a statement. "Our proposals will make sure that we can build upon an already strong U.K. insurance industry--one that has come through this crisis in robust shape, and is a major international player."

The ABI called for the creation of a corporate tax exemption for companies with overseas branches, to make it more attractive for these organizations to keep their headquarters in the United Kingdom. The ABI would also like to see an eventual reduction in corporation tax and a change in regulations that apply to foreign companies to allow more efficient use of capital.

According to the survey, 71% of the chief executives and finance directors of major U.K. insurers said corporate taxes are too high. In 2007, the ABI said, insurance companies paid almost 10 billion pounds (11.2 billion euros) in taxes in the United Kingdom, the third highest amount of corporate tax paid by any industry.

"So maintaining low corporation tax rate will help ensure companies remain in the U.K., contributing significant levels of tax," the ABI said.

The United Kingdom tax structure needs both to reflect the effects on insurers of the volatility of their businesses and offer predictability. The ABI said high personal taxation "reduces the attractiveness of the U.K. as a place to work for company executives."

The report called for alertness to the likely tax effects on U.K. competitiveness from Solvency II, which is due to establish a uniform regulatory system for insurance and reinsurance within the 27-nation European Union in October 2012.

The ABI pointed to the emergence of more critical attitudes, "especially in North America," toward offshore tax havens. This shift, the association suggested, could weaken the appeal of such reinsurance domiciles as Bermuda. One result could be a flow of reinsurance and wholesale capacity to the United Kingdom, the report said.

According to the ABI, the United Kingdom is now home to just 10% of the total reinsurance capital in the world and not a single major reinsurer.