Increasing political pressure may force more captives to move onshore posing a threat to Bermuda — that’s according to a recent report published by Intelligent Insurer.The article interviews Clive O’Connell, a partner at law firm Goldberg Segalla Global, who says we could see more captives move onshore in the coming months.“There are lots of reasons why companies set up in Bermuda and why they move away. At present, there is a lot of governmental pressure on both sides of the Atlantic against what might be perceived as tax havens. Some companies are taking a very strict view on that,” Mr O’Connell told Intelligent Insurer.The concern surrounding offshore captives comes as officials in New York State continue to investigate the use of captives by some insurance and reinsurance companies.The New York Department of Financial Services, led by Benjamin Lawsky, began its investigation last July, requesting information about the arrangements from about 80 life insurers in the state. Mr Lawsky said in a speech last month that offshore captives reduce the amount of reserves insurers hold to pay future claims and threaten the stability of the entire insurance system.Just two week ago, MetLife Inc announced it would merge its offshore captive reinsurance unit (based in Cayman) with three of the parent company’s US subsidiaries — a move lauded by New York state regulators.The merger “proactively addresses recent regulatory concerns about the use of captive reinsurers,” New York-based MetLife said in a presentation to investors. It could also help the company be in a “better position to deal with Dodd-Frank derivative collateral requirements”.“The New York Department of Financial Services’ industry inquiry regarding captives was an important factor in our taking a closer look at our offshore reinsurance subsidiary,” MetLife CEO Steve Kandarian said the presentation.Mr O’Connell says the MetLife move could be the first of many offshore exits.“Over the coming months insurers are going to look at the arrangements that they’ve made in order to ensure that they are acting within the arm of the law and socially acceptable parameters,” he said.Because this is an issue unique to life insurers engaged in regulatory arbitrage, it might not have too significant of an impact on Bermuda, which has long been considered a base for non-life insurance and reinsurance companies. The Island did however see a surge in interest from the life sector last year with three times as many new long-term insurance registrations in 2012 as in 2011.“The Bermuda insurance market continues to have a robust Long-Term (life insurance) sector,” a spokesperson for the Bermuda Monetary Authority (BMA) said. “This is reflected in the Long-Term sector’s consistent performance, writing over $34 billion in gross premiums and holding substantial amounts of both assets and capital and surplus.”“At the end of 2012, 176 Long-Term firms were registered in Bermuda,” the spokesperson added. “This total included nine new Long-Term firms which had registered in 2012 — up from three registrations recorded in 2011.”According to the BMA, Bermuda also remains the largest domicile in terms of active captives — a total of 856 as of the end of last year, with $20 billion in gross premiums written.While this is an issue affecting life insurers and their captives, with other legislation looming, such as the Neal Bill, some in the industry feel other insurers could follow in the footsteps of MetLife. The controversial bill in the US Congress would deny tax deductions for reinsurance premiums paid to foreign affiliates by domestic insurers. Some say insurers moving onshore could encourage support for Congressman Richard Neal’s proposed plan, but Mr O’Connell told Intelligent Insurer he doesn’t believe that to be the case.“In some ways, if companies start doing this off their own volition then there’s no need,” he said. “Politically, there’s a growing momentum among governments to try and regulate global businesses on a national scale, but this is a difficult thing to do.”