American Dream Relocates to Bermuda, Says Fishman, Blaming Taxes
Jay Fishman, who built New York-based Travelers Cos. into one of the world’s biggest insurers, lamented that disparities in tax rates are pushing established rivals and industry newcomers outside the U.S.
Over the past 15 years or so, “we’ve counted 10, 12, maybe even 15 Bermuda-based startups that ultimately became decent-size companies,” Fishman said Wednesday at a conference sponsored by Barclays Plc. “We can’t find one in the U.S.,” he added. “As an American citizen who’s benefited enormously from the American dream, I think that’s unfortunate. It’s a public-policy opportunity that should be addressed.”
U.S. money-management firms including Oaktree Capital Group LLC and BlackRock Inc. have worked with industry veterans to start insurers offshore in the past year. Goldman Sachs Group Inc.-backed mortgage guarantor Essent Group Ltd. and Dan Loeb’s Third Point Reinsurance Ltd. are among Bermuda-based firms that had initial public offerings in recent years.
Ace Ltd. began in Bermuda in the 1980s to provide excess liability coverage, and expanded through global acquisitions. The company moved to Zurich in 2008 and agreed in July to buy Warren, New Jersey-based Chubb Corp., one of Fishman’s largest competitors, for more than $28 billion.
“The fact that Chubb, venerable Chubb, is now going to be a Swiss company, speaks, I think elegantly, to the dynamics of our own corporate tax rate,” Fishman said. Chubb previously went to Congress to protest the federal loophole that allowed companies to limit taxes by moving offshore.
Fishman formed his firm with the 2004 merger of St. Paul Cos. and Travelers Property Casualty Corp. and then moved its headquarters to New York from Minnesota. He subsequently made acquisitions in Canada and Brazil. The CEO, who is stepping down this year for health reasons, didn’t specify during Wednesday’s remarks what changes should be made in the U.S.
U.S. investment firms like hedge funds can also gain tax advantages by setting up offshore insurance ventures. David Einhorn’s Greenlight Capital Re Ltd. is based in the Cayman Islands, and JPMorgan Chase & Co.’s Highbridge Capital Management helped form a reinsurer in Bermuda. The Internal Revenue Service proposed rules in April to limit the number of companies that receive favorable treatment.
“Taxes are one cost like any other,” Fishman said. “When there is a meaningful advantage in one environment, you will see over time, you will see capital and capital creation move that way.”