Companies on both side of the Atlantic are threatening to move to Bermuda unless legislation is changed to correct what they perceive to be unfair tax advantages for Bermuda-based insurers and reinsurers.

Both the long established British insurance company Chaucer Holdings and the multi-billion dollar property casualty insurance empire WR Berkley Corp., based in the US, have expressed the possibility they may relocate to Bermuda if attempts to change tax laws in their respective countries are unsuccessful.

The news comes on the heels of a similar threat from MBIA, the world's biggest bond insurer, made last month when its chief executive officer Joseph Brown suggested that it would have to move if the US tax code was not modified — despite wishing to remain in the US.

Chaucer Holdings' CEO Ewan Gilmour told Reinsurance magazine they were considering the move after efforts to get the UK Chancellor to reduce taxation on reinsurers' reserves were unsuccessful.

"We were optimistic that we might get something from the UK Chancellor regarding reinsurance reserving but now we're less optimistic," he said. "Now, we'll have to have another look. We don't like the impact it may have on the business in terms of business interruption but we have to do the maths." Meanwhile W.R. Berkley Corp.'s CEO William Berkley has been lobbying Washington to overturn a tax law created 20 years. He heads up the Coalition for a Domestic Insurance Industry, a group of 14 large US-based insurance groups with nearly $1 trillion in assets.

The law allows foreign-based insurers to move their taxable underwriting and investment income from their US-based businesses out of the country by reinsuring their businesses with a foreign affiliate in a low-tax or no-tax locality like Bermuda.

Most insurance companies buy reinsurance on their own policies to reduce the amount they must pay to cover claims. But the current US tax system allows foreign-based insurers to profit in ways domestic companies cannot, by investing the money they used to purchase tax-free reinsurance, Mr. Berkley told The Stamford Advocate.

Mr. Berkley also questioned if overseas based companies would feel obligated to come through if the US faced another large scale terrorist attack, similar to 9/11.

But Bradley Kading, president of the Association of Bermuda Insurers and Reinsurers (ABIR), told the newspaper the logic was flawed. ABIR was created to represent regulatory interests of the Island's biggest insurers and reinsurers in Washington.

Mr. Kading said: "We write a lot of business that US insurers don't want to write."

A recent publication by ABIR, "Analysis of the US Economic Impact of Bermuda based Insurers and Reinsurers", showed the role Bermuda-based companies have played.

It revealed that the Island's firms employ 9,600 Americans directly in the US and indirectly generate 95,045 jobs.

It also claims Bermuda's re/insurance sector paid out $17 billion in property claims in 2005 for hurricane damage, representing 25 percent of the total property damages covered.

The findings, which were released in November, calculate that Bermuda's insurers provided enough funds to replace 87,042 homes (based on median home values), including 45,419 homes in Louisiana and more than 24,000 in Mississippi.

Bermuda-based carriers also support 57 percent of US crop insurance and reinsurance markets and 25 percent of the U.S. medical liability insurance and reinsurance market.