When Brian Duperreault speaks, Bermuda's business and financial leaders listen.

And they should listen to, and think carefully about, what the chief executive officer of ACE Ltd. had to say at Hamilton Rotary Club this week.

Up until now, most local debate has focused on the US tax system for the problems caused by companies like Ingersoll Rand and Stanley Works' plans to move their domiciles to Bermuda. Much of the argument has been over how, and how loudly, the Island should fight patriot taxes and the like in the US, where Bermuda's image has been taking a beating.

Mr. Duperreault, perhaps wisely, did not deal with that issue in his speech to Hamilton Rotary Club.

Instead he argued in effect that there is not much little Bermuda can do to change the US tax system or to sway the mood of Congress or US voters.

Instead, he focused on what Bermuda itself should be doing about the problem. Should Bermuda agree to accept companies that move from their headquarters from the US to Bermuda when the benefit of the moves is at best minimal, or in Mr. Duperreault's words, no more than the cost of incorporation?

There is a world of difference, he argued, between an ACE or an XL Capital being established in Bermuda, employing hundreds of people on the Island and contributing in multiple ways to the whole community, and an Ingersoll Rand, which is simply a file in a management company, or a brass plate at a lawyer's office.

And is the ongoing damage being done to Bermuda's reputation worth those minimal financial benefits that these companies bring?

Mr. Duperreault says they are not. And in terms of outright incorporations from the US, the benefits are few.

The bar he said, has been lowered and Bermuda's reputation has been hurt. In fact, there has never been a bar or standard of physical presence or local contribution.

And demanding that any company that moves to Bermuda or is incorporated here must have a significant physical presence on the Island, or must contribute to charities and so on, may be too simplistic.

Bermuda has benefited from US reinsurance companies moving to the Island, in part because any reinsurer with global ambitions must be in Bermuda because of its global importance as an insurance market.

Some of these companies have little or no significant physical presences - yet. But it should be remembered that from small acorns grow mighty oaks, as was the case with ACE itself. Indeed, of the thousands of companies registered in Bermuda, fewer than ten percent have a physical presence, but who knows which of the others will eventually grow to rival the ACEs and Bacardis of today.

So a blanket ban, or a requirement for a company to be a certain size when it comes, probably will not work.

Mr. Duperreault was not talking about blanket bans of course; but the challenge is where do you put the bar if it's a good idea to have one.

The fact remains that Bermuda has taken great pains over the past 30 years to distance itself from the tax haven label, and now any that's the first thing that will come to the mind of anyone who reads newspaper business pages or follows US politics.

Of course, almost all companies that are either created here or move here from elsewhere do so at least in part for tax reasons. But most come to Bermuda for other reasons too. Some are global companies that benefit from being based in a neutral place. Many do it for regulatory reasons. The Island's first class infrastructure and mid-Atlantic geographical position are also compelling, as is the Island's legal system and political stability.

But when a company gives tax avoidance, or tax reduction, as its sole reason for moving to Bermuda, it may be time for the Bermuda Monetary Authority and the Ministry of Finance to give them closer scrutiny.

Many will disagree with Mr. Duperreault over where he seems to thinks the bar should be placed. But he is right that Bermuda should think hard about having a bar; the damage being done is too great.