by Leroy Baker, Tax-News.com, New York Wednesday, January 13, 2010

Global insurance group XL Capital Ltd proposes 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 indicates 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."

XL will continue to be registered with the SEC and be subject to SEC reporting requirements. The company's shares will continue both to trade on the New York Stock Exchange and to report its financial results in US dollars.

XL states that a new Irish public limited company, XL Group plc, should replace XL Capital Ltd as the ultimate holding company of the XL group of companies, and the company's ordinary shareholders would receive one ordinary share of the new Irish company in lieu of each ordinary share of the company held by them. XL expects to submit the proposal for redomestication, along with related proposals, to its shareholders in the next several months and complete the transaction on July 1, 2010. The proposed redomestication will be subject to approval by the company's ordinary shareholders and the Grand Court of the Cayman Islands, as well as satisfaction of other conditions.

XL's rationale for the move is that it has operated in Ireland for most of its corporate history and is very familiar with Ireland's regulatory and legal environment. Ireland has strong international relationships as a member of the Organization for Economic Cooperation and Development and the European Union, a long history of international investment, and long-established commercial relationships, trade agreements and tax treaties with the other EU member states, the United States and other countries around the world. As a result, XL believes Ireland offers a stable long-term legal and regulatory environment with the financial sophistication to meet the needs of XL's global business.

Several insurance industry investments have been attracted to Ireland ostensibly for tax and regulatory reasons, including Willis, Everest Re, Beazleys, Canopius, Aspen Insurance, and Bowring Marsh.

A comprehensive report in our Intelligence Report series, titled "Offshore For Corporates", discusses in depth the comparative merits of offshore HQs, with a Corporate Treasury section analysing how to get an optimal blend of tax-efficiency and profits and finally a study into how two types of international business can use onshore low-tax regimes in parallel with offshore jurisdictions to construct highly tax-efficient corporate structures, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report7.asp