Bermuda reinsurers are satisfied that they have given a good counter-argument to a move at the US Senate that seeks to change tax policy and other regulations to the detriment of offshore insurers and reinsurers who do business in the United States.

A coalition of US insurers wants to see offshore competitors pay higher excise tax, or be restricted in the amount of business they can acquire from within the US in order to level the playing field with those companies who are solely US-based and therefore pay full taxes on earnings.

But the Association of Bermuda Insurers and Reinsurers (ABIR) yesterday gave its side of the argument to the US Senate Finance Committee at an informational meeting.

Bermuda-based American Donald Kramer, CEO of Ariel Re, represented the association and in his presentation to the Washington DC-based Senate showed that offshore insurers and reinsurers benefit the US economy because of the speed with which they pay out claims when disasters strike, and have the ability to raise capital quickly and to react to situations with greater efficiency than their US counterparts. He also pointed out that the offshore companies create, directly and indirectly, tens of thousands of jobs for Americans as a result of their part they play in the US insurance market.

Bradley Kading, ABIR president, told the Royal Gazette: "We were able to make our points that Bermuda provides important coverage for the benefit of US consumers and businesses.

"Bermuda insurers are in Bermuda because of ease of entry quickly based on a streamlined regulatory framework. Tax issues are overplayed. Affiliated reinsurance is done by Bermuda insurers for the same reason it is done by US reinsurers: avoid trapped capital, transfer risk and maintain capital pools that allow easy entry to markets and territories based on opportunities.

"ABIR was in the US capital to offer its side of the debate in response to a call by a coalition of 14 large US-based insurance groups, who argue that major tax advantages for foreign insurance groups threatens the future of the US domestic insurance industry.

The coalition is headed by William Berkley, CEO of Berkley Corporation, who said the tax advantages of insurers and reinsurers in places like Bermuda and the Cayman Islands means they legally avoid paying billions of dollars in taxes on much of their US underwriting and investment income.

"By contrast, US-based insurers must pay current US tax on all of their income from these policies. Thus, even though the US income-generating activities are the same, these foreign-domiciled insurers can avoid US tax on much if not all of their underwriting and investment income," he said.

According to Mr. Berkley, growth in related-party reinsurance written to foreign affiliates has been dramatic and will be over the $100 billion mark by 2012.

"The data also demonstrates that the principal incentive for this increased related-party reinsurance activity has been the avoidance of US income tax," he said.

In a letter released yesterday, the Coalition For A Domestic Insurance Industry urged House Ways and Means Committee Chairman Charles Rangel and Ranking Member Jim McCrery to adopt legislation to remedy this significant and unfair tax advantage, predicting that in the absence of corrective legislation, "foreign-domiciled insurers will continue to use their tax advantage to gain a greater share of the US insurance market."