Insurance Expert Says Bermuda Has 'Strong Case' Against Patriot Tax

by Mike Godfrey, Tax-News.com, Washington

03 April 2002

Leading US insurance economist Dr Robert Hartwig has suggested that US insurers located in Bermuda have little to fear from the 'patriot tax' legislation currently under discussion in Washington.

Concerns have been expressed that legislation designed to remove the tax benefits of offshore reincorporation, primarily targeted at manufacturing companies such as Tyco and Global Crossing, could adversely affect a number of insurance and reinsurance firms based in the low tax jurisdiction.

However, speaking to the Royal Gazette last week, Dr Hartwig attempted to soothe those fears, arguing that the bills introduced by Senators Richard Neal and Scott McInnis are not intended to punish bona fide companies, but to crack down on 'sham operation shenanigans'.

Dr Hartwig, who is with the New York office of the Insurance Information Institute (III), stressed that there would be a distinction made between reputable offshore players providing a service such as ACE and XL, and companies which abuse the system, such as former energy trading giant Enron.

'I don't think the intent is to damage the offshore insurance industry as it is providing much needed capacity,' he explained, referring to the aftermath of the September 11 terrorist attacks.

However, although it is not the target of the proposed legislation, Dr Hartwig admitted that there was a chance that the offshore insurance industry could be inadvertently affected.

'There is some danger of throwing the baby out with the bath water. That would be unfortunate,' he told the newspaper. 'But insurers could also make the case that... (they) are providing capacity at a time when there is the biggest need.'

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