Bye-Bye Bermuda: Willis Group Is on the Move Again

Willis Group Holdings CEO Joseph Plumeri is known for seizing any opportunity that comes his way. He took over the world's third largest insurance broker after a street corner conversation with Henry Kravis of the private equity firm Kohlberg Kravis Roberts. Now, Plumeri is on the move again. He's packing his corporate bags and taking the insurer from Bermuda to Ireland.
Why would any firm leave Bermuda? It's insurance heaven: low taxes, minimal regulation, and no state attorneys general looking over your shoulder. Plumeri moved Willis Group to Hamilton from London in 2001 after he took over the insurer and went public. But now the silver-haired, silver-tongued CEO says this move will allow Willis to get closer to European Union states, and maintain a "more stable financial environment."

Honestly, though, it's all about the taxes. If Bermuda has low taxes, Ireland, in the midst of a recession, has even lower taxes. In fact, taxes are so low that other EU nations have been complaining about it.

It must be nice to skip across the pond when the occasion calls for it. That luxury is not afforded to Willis Group's competitors, New York-based Marsh & McLennan and Chicago-based Aon Corp. At the very least, they would get a lot of flack if they tried.

Both are caught in a squeeze play. They are still bound by rules agreed to under then New York Attorney General Eliot Spitzer which prevent them from accepting "contingent commissions" from insurers for pushing their products to clients. Contingent commissions may not sit well with the public, but they are no worse than companies getting "shelf space" by paying off supermarket chains to push their products. And contingents were a significant part of both companies' revenue stream; in Marsh's case about $800 million a year.

In the interim, smaller insurance brokers that didn't agree to these handcuffs have been eating the bigger brokers' lunch. Marsh and Aon recently cried "uncle" to state regulators and are trying to get the rules changed.

Willis Group also agreed to Spitzer's rulings and doesn't take contingent commissions from insurers. In contrast to Marsh and Aon, Plumeri is quite content with that. But then, he's not paying taxes, either.