Bermuda's Insurers Edgy Over US Legislation

by Mike Godfrey, Tax-News.com, Washington

01 April 2002

There are fears among Bermuda's insurance sector that legislation being pushed in the US to tax companies which reincorporate offshore as domestic companies may not just apply to the manufacturing firms which sparked the recent furore.

Although the debate has so far centred on companies such as Tyco, Global Crossing, and Ingersoll Rand, a report in the Bermuda Royal Gazette last week suggested that insurance and reinsurance firms which have relocated from the US, such as PXRe, Scottish Annuity & Life Holdings and Everest Re, may also be affected if the legislation is passed.

Speaking to the Royal Gazette, Jim Foster of Everest Re said that the company was 'attempting to follow' the progress of the bills through Congress, and on examination of the preliminary drafts of the two pieces of legislation introduced by Richard Neal and Scott McInnis, believes that the Neal bill could bear on the company because it contains retroactive provisions.

There is by no means a consensus on the likely outcome of the legislation, and newly reincorporated insurance and reinsurance underwriter, Trenwick, told the newspaper that although it is 'always looking at what is happening on Capitol Hill', initial assessments of the preliminary drafts suggest that the company has nothing to fear. CFO Alan Hunte explained to the newspaper that this was because the firm did not make the move to Bermuda as a 'corporate inversion', but as part of a merger with LaSalle Re Limited.

However, a previous piece of legislation sparked by the row which initially began with US insurance and reinsurance companies in 2001 is still being pushed for in Congress, and could pose a very real threat to the jurisdiction's insurance sector.

Following complaints from US-anchored insurance companies that their offshore rivals had an unfair tax advantage, Senators Richard Neal and Nancy Johnson put forward a bill which would deny deductions for reinsurance companies paid to organisations based in low tax countries.

President of the Washington based Center for Freedom and Prosperity, Andrew Quinlan has revealed that his organisation is actively pushing for the new legislation, and the older Johnson-Neal bill to be halted, and told the Royal Gazette that he may meet with the House Ways and Means Committee to testify on what he describes as 'bad, bad tax policy'.

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