The Bermuda Government has been working behind the scenes lobbying the United States Congress to halt legislation which could damage the insurance industry on the Island, it was revealed yesterday.

Premier Jennifer Smith fended off hostile questioning from foreign business journalists, including from the leading New York Times, over the "Bermuda Tax issue'' at a press conference held in San Francisco during the annual Risk & Insurance Management Society Conference.

Legislation is currently going through Congress at the moment which is designed to stop a so-called "tax loophole'' which the bill's supporters say allows billions of dollars to leave the US without income tax and could be passed by the end of the year.

Ms Smith went on the offensive, saying that the bill unfairly singled out Bermuda and was effectively meddling in another country's tax policies.

"In the first place we feel very strongly that Bermuda has been singled out in this manner. If one was to take the charges to their logical conclusion, there would be a number of countries not just offshore jurisdictions, but I think every other country apart from the US which has become a part of this thing. It actually ignores some very fundamental and basic rights that they should not try to influence the tax considerations of another country.'' When asked if she was referring to Congress or to the four American insurance companies behind the scheme, she said: "The people who have brought the legislation which singles out one country which is not doing anything different from any other country.'' Ms Smith went on to say that the singling out of Bermuda in the bill may be due to some kind of mistake.

During the hour-long press call, Ms Smith revealed that the Progressive Labour Party had been working for months with business to find a way to halt a bill that is currently before Congress.

In the Government's first public statements on the issue since it was raised several months ago in an article in the New York Times, Ms Smith said that the Government was not happy that the legislation singled out Bermuda from other offshore jurisdictions.

Four American insurers have been trying to get the Bermuda Bill passed because they believe that Bermuda insurance giants ACE Ltd. and XL Capital are taking advantage of a so-called "tax loophole'' with US companies they bought out last year.

The companies, which include Chubb and Hartford, say that the two companies are acting illegally by reinsuring their own business and are avoiding paying US income tax on business done in the United States.

Both companies have denied they are doing anything illegal or improper and the move has been called "protectionism'' by XL.

Ms Smith was joined by Finance Minister Eugene Cox, and Minister of Telecommunications and E-commerce Renne Webb at the event which was hosted by the Bermuda International Business Association (BIBA).

Ms Smith added: "And I think that Bermuda's reputation, our standards, can show up this particular ploy for what it most likely is, which is an attempt to interfere in this jurisdiction where companies have been successful under the law.'' When asked why she thought the Island had been singled out, she said: "I have no idea. Maybe it was a mistake. They might have faired better if they had picked on somewhere else but perhaps the mistake is important in the fact that Bermuda can safely lead the way for other countries, because we can in fact stand on our reputation. Bermuda is proud of the fact that we are third in the world, and we are proud of the fact that we have within our shores the majority of expertise in reinsurance and the insurance, and that will be a reason.'' She added that details of what was being worked on behind the scenes could not yet be revealed.

"We are doing many things and do not fight just on one front. What we are doing is dealing with the problems and not be sucked in to a fight between individual companies.'' And she said that the subject had to be looked at in the terms of the fact that it was an election year in the United States.

"This is an issue about one or two companies against one or two companies who happen to be located in Bermuda.'' She added that the Bermuda companies paid all the taxes in America and that it was discriminatory to single out the Island in the issue.

For more coverage of RIMS see Business, Page 19 .