Insurance and reinsurance group XL Capital (XL) yesterday announced its intention of shifting its place of incorporation to Ireland from the Cayman Islands. The company has had significant operations in that country and has grown them in recent years.
XL Capital would change its name to XL Group but will keep trading on the New York Stock Exchange under the existing ticker symbol “XL.” The company will continue with its registration under the U.S. Securities and Exchange Commission (SEC) and will also maintain compliance with SEC reporting norms, reporting its financial results in U.S. dollars.
The existing company’s shareholders will receive one share of the new company for every share held. Post-incorporation, the company will have to hold more than half of its board meetings in Ireland as per the requirement.
The transaction, which is expected to be completed by mid-2010, is contingent upon approval by XL Capital’s ordinary shareholders and the Grand Court of the Cayman Islands, as well as satisfaction of other conditions. The transaction is not expected to have any material effect on the financial results.
Many companies have been incorporated in the Caribbean for some time now, due to the tax benefits places like the Caymans provide. However, increased scrutiny by both U.S. and European lawmakers aimed at cracking down on abuses and collecting more tax revenue from multinational operations has rendered the place less lucrative. Moreover, the recession has hurt revenue for many islands in the British Caribbean, which could lead to higher taxes for companies based there.
The incorporation will bring many benefits, including the protection of XL Capital’s officers and directors from personal liability, asset protection, tax benefits and increased ability to effectively value and market the company. Ireland has recently experienced a boom in its technology and manufacturing industries, and its growing insurance market. Many businesses are looking into the requirements for incorporating a business here.
Recently, a number of insurance companies, including Willis Group Holdings (WSH), Aviva (AV) and ACE Limited (ACE) have considered similar moves.
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