The proposed Terra Nova insurance merger should boost Bermuda's efforts to shed its international image as a tax haven.

Under the deal announced last week United States-based niche insurer Markel Corporation is to snap up Bermuda-based reinsurer Terra Nova for $905 million or $34 per share.

One of the key parties behind the deal, Markel Corporation vice chairman Steven Markel, told The Royal Gazette it was Bermuda's increasing reputation as a "world insurance centre'' that sparked the interest.

And because a US-company was to buy a Bermuda company there was no real tax benefit, he said.

But Bermuda offered other intrinsic advantages.

Markel Corporation markets and underwrites specialty insurance products and programmes to a variety of specialty markets and is based in Glen Allen, Virginia.

Mr. Markel told The Royal Gazette that Terra Nova -- the holding company for five entities including United Kingdom and Paris operations -- would continue to exist in Bermuda after the merger.

And he said the insurer would continue to operate in very much the same way it does now.

New York Stock Exchange-listed Terra Nova (Bermuda) Holdings Ltd. is the holding company for five wholly owned operating entities including Terra Nova Insurance Company Limited in the UK and Corifrance in Paris.

Another of the subsidiaries, Octavian Syndicate Management Limited, manages eight Lloyd's syndicates.

But after the deal is finalised the Bermuda operations will become a branch of a US-based company so its operations will be taxable under US law, rather than benefiting from the lower tax regime which Bermuda companies enjoy.

"There's going to be very little change in Terra Nova's operations or structure after the merger,'' he explained from his Virginia office.

"Some of the corporation functions will probably change but its insurance and operation functions will not change at all.'' Mr. Markel also said a name change was unlikely: "I don't think that's in store, no.'' Asked whether Terra Nova's operations through Bermuda would become taxable under US law, he replied: "Yes they do.'' But he explained other advantages and motives prompted the deal.

"As I'm sure you're aware Bermuda has become somewhat of an insurance centre for the world so from that perspective we see it as an advantage to have operations there, it's important in the insurance industry.

"A lot of people come to Bermuda to buy insurance of whatever type and we are looking forward to being part of that market.

"So while we're not going there for any tax advantage, we expect to continue doing business in Bermuda for the other reasons.

"We want to continue Terra Nova's operations as they currently exist.

"Also the regulatory environment in Bermuda is a plus, it's what I guess could be described as very business-friendly.'' Merger to boost Island's image He also pointed out that many of Terra Nova's operations already took place in the United Kingdom and "there's not a great difference in the tax environments in England and the US''.

It is understood Terra Nova was targeted for its diverse worldwide property, casualty, marine and aviation insurance and reinsurance business, which should bolster Markel's global strength and widen its product line-up.

Mr. Markel said the next step in the merger process was for relevant documents to be filed with the US Securities and Exchange Commission.

After that a meeting would be scheduled for shareholders to take a vote on whether to give the merger the nod or not.

The deal is expected to be finalised by the end of this year or early next year but is subject to the usual regulatory and shareholder approval.