THE Neal Bill for the Introduction of Reinsurance Tax Legislation was introduced in the US House of Representatives by Congressman Richard Neal, a Democrat from Massachusetts. The Bill targets off-shore insurers like those based here in Bermuda, as well as private equity.

"Since 1996, the amount of reinsurance sent to offshore affiliates has grown dramatically, from a total of $4 billion ceded in 1996 to $34 billion in 2007, including $19 billion alone to Bermuda affiliates," Rep. Neal told the House.

Introduced in September, the bill is backed by a coalition of America-based insurance companies such as the Chubb Corporation and the W.R. Berkeley Corporation. The CEO of the W.R. Berkeley Corp claims Bermuda-based insurers "use the guise of risk-spreading to avoid tax".

"Foreign-based insurers, including the ACE Group (ACE) and XL Capital Ltd. (XL), avoid taxes on their US business by reinsuring policies written in the US to Bermuda-based affiliates," according to a statement released by the Neal Bill backers and reproduced in press outlets worldwide late last year.

Bermuda's (re)insurers see the Neal Bill as protectionist. Mr. Kading told MarketWatch last year that his members do indeed pay tax on their US business, including a federal excise tax on reinsurance transactions, and a tax on "ceding commissions" to the US affiliate for reimbursement of expenses.

In December, the influential chairman of the Senate Finance Committee, Democrat Max Baucus of Montana, introduced a draft of proposed legislation echoing the Neal Bill.

If passed, the legislation will tax related-party transactions by Bermuda-based and other non-US insurers, and will affect major insurance companies with US subsidiaries such as ACE and XL.

Mr. Kading and his team at ABIR have until February 28 to file comments on the Baucus draft.