Back To Top

Your Lowtax Account


Ireland: Offshore Business Sectors

Insurance

See Offshore Business Review – Insurance for a more general treatment of captive insurance companies.

Insurance business in Ireland (including captive insurance) is regulated by the Central Bank of Ireland since October, 2010. Following the 1994 implementation of the EU Insurance Framework Directives, there is a 'single passport' regime in effect for EU insurance companies, and they can commence business in Ireland, as elsewhere, subject to a notification procedure and the annual filing of accounts with the Registrar of Companies.

However, the captive insurance sector in Ireland has taken root in the International Financial Services Centre (IFSC) in Dublin, where substantial tax advantages have traditionally been available to companies who obtain certification.

Captives (or other insurers) based in Ireland can take advantage of almost 60 double tax treaties, although the withholding tax exemptions available through the IFSC do compromise treaty benefits in some cases. From 2003 the 10% IFSC regime was supplanted by the 12.5% general corporation tax rate.

The events of 9/11 in 2001 temporarily dampened the rate of growth of the insurance sector, but in 2002 strengthening premium rates led to an influx of new capital and company formations. 50 captives alone were formed in the first nine months of 2002 in Dublin.

In April 2001, the Irish government announced the formation of an Irish Financial Services Regulator (IFSR), following recommendations made in the McDowell Group Report which called for the integration of financial services regulation in Ireland. Among the financial sectors governed by the IFSR are the insurance industry, and the aim is to protect consumers.

Also in April 2001, Ireland's Central Bank announced that it had taken over responsibility for the regulation and supervision of insurance intermediaries. This resulted in about 5,500 new firms coming under the regulatory framework of the Central Bank. This new addition to the Central Bank’s responsibilities, under the Insurance Act 2000, extends the scope of the Bank’s supervisory remit to cover the protection of clients of insurance intermediaries, both life and non-life.

As of 2008, there were 170 licensed captives in Ireland, the third-highest tally in Europe.

In October 2009, Aviva, the UK's second largest insurance firm, announced plans to consolidate its European business under the umbrella of a new holding company in Ireland, but the firm has insisted that the move was not motivated by a desire to reduce the amount of tax it pays.

The company announced that the plan is designed to cut costs and consolidate its business across its 12 separate operations in Europe. But while the company expects that the move will cut its overall tax rate, it argues that tax savings are not the sole motivation.

A company statement announcing its decision explained that: "As part of the transformation of its European business Aviva has established a single holding company for its European operations in Ireland. It will convert a number of existing subsidiary businesses in the region to branch status, where it is appropriate to do so, and subject to regulatory approval. This will deliver economic, operational and regulatory benefits to Aviva, especially with the anticipated introduction of Solvency II."

A number of UK-incorporated companies have fled the UK citing the burdensome corporate tax laws as a primary reason. Another major UK insurance firm, Brit Insurance, is among this list of companies.

In January 2010, Global insurance group XL Capital Ltd proposed to move its parent holding company's place of incorporation to Ireland from the Cayman Islands, with the parent holding company to be renamed "XL Group plc", according to a statement issued by the company.

XL's Chief Executive Officer, Michael S. McGavick, said: "We believe that changing XL's place of incorporation from the Caymans to Ireland is in the best interests of XL and our shareholders. Among other benefits, we believe the proposed move will reduce certain risks that may impact us and offer us the opportunity to reinforce our reputation, which is one of our key assets, and to better support our global business platforms. The new 'XL Group' name is desirable to reflect our exclusive focus on providing property, casualty and specialty insurance and reinsurance products for our customers' complex risks."

XL's statement indicated that redomestication will not have a material impact on its financial results, the implication being that it can continue to enjoy low tax advantages comparable with those pertaining in the Cayman Islands, whilst gaining the stated benefits. In its filing with the US Securities and Exchange Commission (SEC), XL has reported "reputational, political, tax and other risks because of negative publicity regarding companies that are incorporated in jurisdictions, including the Cayman Islands, whose economies have low rates of, or no, direct taxation."

The following month, Insurance firm, United America Indemnity also announced its intention to re-domicile from the Cayman Islands to Ireland.

The company had previously planned to re-domicile to Switzerland but later determined that incorporating in Ireland is in the best interests of both the company and its shareholders. In a statement, UAI underscored that its decision was motivated by Ireland’s “attractive business environment, a highly educated and motivated professional workforce, a comprehensible legal system grounded in common law, a sophisticated regulatory environment, and an extensive global network of international treaties.”

See Law of Offshore for further details of the regulatory regime for insurance in Ireland; see Offshore Legal and Tax Regimes for details of the IFSC and the application process; and see Double Tax Treaties.

 

 

Back to Ireland Index »