“How Warren Buffett turns U.S. insurance premiums into Bermuda tax havens”
The mechanics (2025)
- U.S. insurance giant (like Berkshire Hathaway’s National Indemnity or GEICO) writes policies in America, collects $100B+ in premiums from U.S. customers.
- Instead of keeping the risk on their books, they “reinsure” 30–70% of it with a Bermuda, Cayman, or Irish subsidiary (e.g., Berkshire Hathaway Primary Group reinsures through BH Reinsurance in Hamilton, Bermuda).
- The U.S. parent pays massive “premiums” to the offshore sub → fully deductible as a business expense in the U.S. (wiping out U.S. taxable income).
- Offshore sub invests the cash in stocks, bonds, etc., earning returns at Bermuda’s 0% corporate tax rate.
- Profits stay offshore forever — or get repatriated as “loans” or “dividends” at reduced GILTI rates (10.5–13.125%).
- Result: Billions in U.S.-sourced profits taxed at near-zero rates.
Buffett’s Berkshire as the poster child
- Berkshire’s reinsurance ops (Gen Re, BH Reinsurance Group) wrote $25B+ in premiums in 2024, with $9B underwriting gain (up 66% YoY per Q4 2024 report).
- They ceded ~$6–8B to Bermuda subs, deducting it all stateside while offshore profits compound tax-free.
- 2025 H1: $3.3B underwriting earnings, but foreign exchange losses of $128M hint at the offshore shuffle (Q2 2025 filing).
- Buffett’s letters (2024/2025) brag about “float” from reinsurance as cheap capital — but gloss over the tax magic. Berkshire’s effective tax rate on insurance: ~5–7% vs. 21% headline.
The money lost
- Industry-wide (insurers like AIG, Travelers, Chubb): $10–15B annual U.S. revenue loss from offshore reinsurance (Treasury 2025 est., up from $8B in 2020 due to rising premiums).
- Berkshire alone: ~$1–2B/year avoided (ITEP analysis of 2024 filings).
- Total through 2030: $100B+ if unchecked.
Real example
- In 2024, Berkshire collected $50B+ in U.S. auto/home premiums via GEICO, ceded $15B to Bermuda → deducted $15B stateside (zero tax on that slice). Offshore sub invests in Apple/Chevron, earns 10% ($1.5B) → 0% Bermuda tax. Repatriated as “management fees” at 10.5% GILTI. Net savings: $300M+ for Berkshire.
Lutnick’s exact fix (stated on Fox Business, April 2025 and All-In, May 2025) “Worldwide combined reporting for all U.S.-based multinationals — pool all global profits, apportion based on U.S. sales/property/payroll, tax at 21%. No more sending premiums to Bermuda and calling it a deduction. One framework. Ends the offshore reinsurance game forever.”
Revenue impact
- Immediate: +$10–$12B per year from insurance sector alone.
- Broader: Forces $50B+ in profit repatriation, boosting U.S. investment.
- Ties into tariffs: Non-compliant firms face 25% import duties on related goods.
What insurers will scream “This kills global competitiveness!” Reality: Bermuda will still be cheaper for pure offshore ops, but U.S. giants can’t deduct cessions to their own subs. Berkshire’s float shrinks 10–15%, but they adapt (they’re Berkshire).
One policy change turns the world’s biggest insurers into actual U.S. taxpayers.
The Hedge 