A report in this month's issue of The Review: Worldwide Reinsurance points to Bermuda being the target of "protection-minded lawmakers".

The article, which is titled "Outside the Jurisdiction" and written by Daniel Mitchell, a McKenna Senior Fellow in political economy at Washington think-tank The Heritage Foundation, said: "In this proposed expansion of extra-territorial taxation, there should be little doubt that the main target is Bermuda." The article highlights the growing perception, particularly amongst US lawmakers, of Bermuda as a tax haven. This was also underscored in a front-page article of Monday's New York Times.

The story focuses on the growing number of companies, including insurance and manufacturing companies, moving to Bermuda. And the story underscores the negative image some US legislators hold of Bermuda with a quote from Iowa Senator Charles Grassley: "There is no business reason for doing this, other than to escape US taxation. I believe the Finance Committee needs to investigate this activity."

Mr. Mitchell said there is both good and bad news for reinsurance business moving to "low-tax jurisdictions like Bermuda".

Mr. Mitchell writes: "The good news is that a Republican White House and a Republican-controlled House of Representatives should make it difficult for protection-minded lawmakers to enact legislation (such as the Johnson-Neal bill) that would undermine competition from foreign-based companies.

"There may also be a tiny silver lining to September 11's dark cloud since policy makers probably now understand the importance of a vibrant and healthy reinsurance market and are therefore unlikely to take steps that could undermine the industry and increase business costs."

On the other end, Mr. Mitchell wrote: "The bad news is that the spectre of tax harmonisation has not disappeared. Many Treasury and Finance Ministry bureaucrats around the world genuinely believe tax competition is bad for global warfare."

The result of the Johnson-Neal bill, according to Mr. Mitchell, would be to: "deny deductions for reinsurance premiums paid to companies based in low-tax jurisdictions, and there should be little doubt that the main target is Bermuda."