The number of Bermudian insurers and other financial institutions in Dublin has accelerated as they expand their business outside North America. Michael Lange explains.
The International Financial Services Centre (IFSC) was established in Dublin by the Irish Government in 1987, offering a range of tax and other incentives approved by the European Union. The primary motivation for the initiative was to create employment at a time when Ireland had an unemployment rate of about 18% (about 8% today). A central attraction for companies considering locating in the IFSC is the reduced 10% rate of corporation tax that applies to such companies.
This fiscal benefit is guaranteed by the European Union until the end of the year 2005, irrespective of any EU tax harmonisation measures that may occur in the meantime. Beyond the year 2005, the Irish Government announced that the general Irish corporation tax rate will be 12.5% for the immediate future. Founded in 1921, the Republic of Ireland is a parliamentary democracy with about 3.621 million people. Approximately 45% of the population is under 25 and over 1 million people are in full time education. Ireland offers a ready supply of suitably skilled people and a modern business environment. Although it is located on the western edge of Europe, its telecommunications are excellent and air links make it possible to travel to most major European cities and return within a working day. In European terms the business environment is also well serviced in information technology, accounting and legal services.
At ACE we watched developments in Dublin from the beginning and in 1996 established a reinsurance company, ACE Reinsurance Company Europe Ltd. Although not a factor in this decision, it is worth noting that reinsurance companies are not subject to formal insurance regulations in Dublin. Rules that do exist include the obligation to notify the insurance regulatory authorities that reinsurance is being carried on and a requirement to file accounts with the Companies Office.
We further developed its capabilities in Dublin in 1997 with the establishment of a direct writing insurer, ACE Insurance Company Europe Ltd. Following a re-branding exercise in 1998, these companies are now known as ACE Europe Re and ACE Europe respectively.
While much attention has been paid to the tax incentives in Ireland, tax benefits were not the reason for establishment in Dublin, as opposed to Luxembourg, Gibraltar or any other base. Dublin is in effect a one-stop shop for new companies. It is accessible, has low frictional costs and has an efficient regulatory regime.
We had managed to develop a very good book of business in Europe without any presence there. The Dublin office will expand the book and bring added value to our clients and the broking community. ACE Europe does not compete with its parent in Bermuda and endeavours to bring the same discipline to the underwriting process.
Both Dublin companies are wholly owned subsidiaries of the parent company in Bermuda and there is extensive interaction between the Irish and Bermudian companies, particularly in relation to the more complex financial risks where multi-disciplinary skills are brought to bear.
The Dublin companies offer a similar product range to ACE Bermuda, including excess property, excess liability, directors' and officers' liability, aviation and financial lines, as insurance or reinsurance. While the Dublin companies are separately capitalised, capacity is common between both entities. They buy quota share and excess of loss protection from ACE Bermuda which complements their security rating.
The timing of our establishment in Dublin was consistent with our policy of global expansion and product diversification. Dublin provides ACE Bermuda with an immediate platform for its products in Europe. The IFSC is rapidly developing as a centre for finite reinsurance to Europe and the rest of the world, as the European underwriting centre for the Bermuda excess market and the European centre for catastrophe insurance and reinsurance.
We believe that there will be other significant opportunities for the insurance and reinsurance sectors such as in the area of securitisation, which has been dominated by banking institutions to date. This will enhance the overall portfolio of products that Dublin based companies can bring in the European marketplace.Michael Lange is senior vice president, ACE international representative office, London. Tel: +44 (0) 171 655 2900; fax: +44 (0) 171 655 2901.