The Association of British Insurers (ABI) has called on the UK government to introduce new tax reforms to protect the nation's insurance market as a domicile of choice in the face of competition from offshore jurisdictions such as Bermuda.

That is according to UK paper The Times and Citywire, which reported that the ABI said that providers and company executives were considering relocating to a new business centre to take advantage of more competitive tax rates, having already contributed £10 billion in corporation tax to the government in 2007. The concern is that a failure to make a more competitive tax regime for British insurers could spark a flood of departures by life and general insurers elsewhere.

A string of UK insurers, including Hiscox, Hardy (both domiciled in Bermuda), Brit and Beazley, have moved their headquarters outside of Britain over the past two years for tax purposes, complaining that the UK system is inflexible and makes it more attractive to be in other jurisdictions like Ireland or the Netherlands.

Citywire said a survey of 75 chief executives and financial directors at ABI member companies and Lloyds of London revealed that 81 percent of respondents expected the number of insurance companies based in the UK for tax purposes to fall.

Meanwhile, almost two thirds of those questioned said the increase in tax rate for high income earners to 50 percent would tempt them to move abroad for work and 61 percent said the UK corporate tax system was uncompetitive.

Stephen Haddrill, the ABI's outgoing director general, said there could be "no room for complacency" over the UK's future position as a business centre.

"We cannot assume the UK will be able to compete as a global centre for insurance or that insurers will continue to invest in the UK in preference to other locations and markets," he said.

"It is absolutely vital that we don't just sit back and say that the pressures on the Government's finances mean that we don't do anything on tax. This is something that we can do something about relatively quickly."

He said communications, infrastructure and educational standards outside of the traditional centres for multinational businesses were improving and executives were becoming increasingly mobile.

"The tax systems of competitor locations such as Bermuda, Ireland, Switzerland and the Netherlands all offer significant advantages in terms of rates of tax and the way profits are taxed that improve the returns to investors," he said.

The professional body has pressed for the immediate introduction of corporation tax exemption for foreign branches, saying that the 50 percent higher rate of income tax on employment should be reversed as soon as was practically possible and all forms of intermediation, including Internet-based channels, should be exempt from VAT under the new VAT directive.

The ABI said that the UK's tax regime needed to take account of the volatility of insurers' earnings, which are subject to being wiped out by big claims in the wake of natural catastrophes, by allowing insurers to carry forward their catastrophe exposures and pay related tax over several years. Additionally, it claimed that efforts by the Treasury to stop companies moving overseas for tax reasons have made it harder for UK insurance companies to pay local tax on profits that they have no intention of bringing back to Britain, and urged the Treasury to grant tax exemptions for UK companies that operate branches abroad.

At the same time yesterday, the ABI renewed its call for immediate changes to the personal tax regime, which threatens to drive individual "insurance talent" out of the country.

The 50 percent higher rate of personal income tax should be scrapped, along with the tapering of tax relief on pension contributions for high-earners, it said.

Mr. Haddrill said that a crackdown on tax havens by US regulators meant that re/insurers that had relocated to Bermuda might consider coming back to the UK if the system was sufficiently enticing.