A group of leading London insurance executives has proposed a set of tax policy changes that it believes could tempt Bermuda companies to move to the UK.

The London 100, a group of executives and chairmen brought together by industry newsletter Insurance Insider, has presented its ideas in a discussion paper.

The opposition Conservative Party, which leads most polls ahead of the UK general election on May 6, has already said it will consider the proposals.

Drawn up with accountancy firm Ernst & Young, the paper focuses on how the UK can stem the exodus of insurers to Ireland and Switzerland, as well as Bermuda.

"We believe that there is a 'window of opportunity' to capture reinsurance business currently underwritten outside the UK as the political uncertainties of Bermuda and the US approach to taxation unfolds," the report states.

Insurance companies are highly mobile and "it is very easy to move large amounts of capital, risks and profits with a single pen stroke on a reinsurance contract", it continues.

Several Lloyd's insurers, including Catlin Group and Hiscox, have moved from London to Bermuda in recent years. The London 100 believes some targeted changes in UK tax policy could lure them back to the UK.

The report states: "Many companies located in Bermuda are considering their options as to where they should be headquartered and locate operating platforms.

"Bermuda has always been attractive from a tax perspective but this is now being challenged partly by the global clampdown on low tax jurisdictions, although Bermuda is now on the OECD white list, but also by the US who are developing legislation that impacts the payment of premiums to offshore insurers and reinsurers.

"In addition to the tax challenges Bermuda is experiencing a huge amount of pressure on its infrastructure and is considering a change to its regulatory environment to coincide with the implementation of Solvency II in Europe. Companies located in Bermuda are looking towards Europe for a new home and Ireland and Switzerland are the favoured locations."

Flagstone Re, a Class of 2005 Bermuda start-up, last month announced it would move its holding company to Luxembourg. Last year, it moved its underwriting operational headquarters to Switzerland. But its local staffing levels and operations on the Island will not be impacted.

Flagstone chairman Mark Byrne said a week before the company announced the move that he expected most Bermuda-based insurers to move their holding companies elsewhere over the next few years.

Ace, the largest operator in the Bermuda market, has moved its holding company to Switzerland and the second largest, XL Capital, plans to reincorporate in Ireland. In both cases, the holding companies were previously in the Cayman Islands.

Uncertainty over US tax policy and the European Union's imminent new Solvency II rules are seen as primary reasons for Island companies to consider shifting their place of incorporation.

London-based companies are also considering their options. Brit moved to the Netherlands and Beazley moved to Ireland in recent months seeking to escape the UK's 28-percent tax on corporate profits. Bermuda's corporate tax rate is zero. A mainstream corporate tax rate of 15 to 17.5 percent "was cited by many as a rate which would bring their companies to the UK", the paper states, adding that it realised this was currently unachievable. The UK has piled up huge public debt in the process of propping up its flagging economy and bailing out its banks during the financial crisis and whoever wins the election, such a swathing tax cut is highly unlikely any time soon.

However, the paper proposes a series of insurance industry-specific measures that its authors believe would increase the attractiveness of the UK as a domicile.

The proposals include changes to allow reinsurers to smooth the tax impacts of their volatile catastrophe-related profits and losses over time, further amendments to the rules affecting controlled foreign companies and exemptions from taxes applied to profits made by overseas branches.

"Our expectation is that these measures, taken together, will not "Our expectation is that these measures, taken together, will not lead to any significant change in UK corporation tax receipts, may give rise to increased receipts from income tax and national insurance contributions and also bring with them less quantifiable benefits," the report says.

London would be the domicile of choice for the industry, if tax were not a factor, the London 100 group found in a survey of senior executives in the London market.

"The quality of the reputation of the regulator and market, access to capital and new business and the availability of skilled resource all make London the first choice location for this industry," the group states in the paper.

"The area that all mentioned as the factor that made other locations more attractive than the UK was tax."

The group's proposals come at a time when the UK Government has proposed an increase in national insurance, which has become known as a 'jobs tax'. Bermuda has burdened firms with a similar increase in the cost of employment through its increase in the payroll tax rate from 14 percent to 16 percent.

For more information on the London 100 group and the tax policy discussion paper, go to www.insuranceinsider.com