S&P affirms Bermuda sovereign rating, cites ‘steady’ insurance performance

By Michael Loney

May 15 - (The Insurer) - S&P Global Ratings has affirmed Bermuda’s A-plus long-term sovereign credit and senior unsecured debt ratings, highlighting the “steady” performance in its insurance industry and the “smooth” implementation of the new corporate income tax.

The rating agency also affirmed Bermuda’s A-1 short-term rating, and AA-plus transfer and convertibility assessment on Bermuda.

The outlook on all ratings is stable, reflecting S&P’s expectation that over the next two years the local economy will remain healthy, and will support solid government finances and low debt, as well as Bermuda's very strong external asset position.

“We believe continued growth and a new revenue stream will strengthen fiscal performance, lower interest costs, and reduce net general government debt over the forecast horizon,” it said.

S&P warned of potential deterioration in Bermuda's international financial services sector due to shifts in the global insurance business, material job losses tied to consolidation, or exogenous shocks that could weaken the territory's economic outlook, external asset position and public finances.

But it added: “Steady performance in Bermuda's key insurance industry, along with the smooth implementation of the new corporate income tax, will support fiscal consolidation and lower government debt.”

S&P said it could raise Bermuda’s rating over the next two years if the territory navigates through this period of heightened volatility and uncertainty without material deterioration in its economy or public finances.

The rating agency does not expect a material direct impact from the imposition of a 10% tariff on goods imported in the U.S. from Bermuda, given limited goods exports to the U.S.

It expects policy continuity under the recently re-elected Progressive Labour Party government.

“Bermuda's prosperity, as indicated by its very high GDP per capita, reflects its prominent role in the global insurance industry, which we expect the territory will maintain in the coming years,” S&P said.

The rating agency expects Bermuda's insurance and reinsurance sector will remain competitive, and that its smaller tourism sector will remain steady.

“Bermuda's key economic sectors continue to support solid growth, which we expect will persist, although moderate, despite global market turbulence and shifts in the government's tax structure,” S&P said.

S&P believes the government's tax collections will remain robust and will be supported by the new revenue stream derived from the CIT, which at the start of this year introduced a 15% tax rate for those companies in scope of the OECD rules, or those with consolidated revenue of €750 million or more.

The first tax installment is due in August 2025.

“Although recent revisions to the domestic tax system, as well as global economic shifts related to policy implementation by the U.S. administration and possible responses, could affect the operating environment, we believe the territory will continue to attract businesses in the sector,” S&P said.