The unprecedented void in insurance capacity following the September 11 tragedy gives Bermuda insurers a strong case to fight against a US corporate "patriot tax".

Insurance economist Dr. Robert Hartwig, who is with the New York office of the Insurance Information Institute (III), said he did not see much threat for Bermuda's insurance industry from the US tax bills that have recently been introduced in Washington.

He said the intent of the bills which have been introduced - so far from Rep. Richard Neal and Rep. Scott McInnis - was not to penalise bona fide companies but to crack down on "sham operation shenanigans". He added that the push on Capitol Hill for amendments to tax legislation is from the "post Enron hangover".

And he said the stability of the insurance industry is key to the economy, following September 11.

"I don't think the intent is to damage the offshore insurance industry as it is providing much needed capacity," he added.

Dr. Hartwig conceded that insurance companies which have redomiciled from the US to Bermuda, or other foreign countries, could "inadvertently" be affected by the proposed tax bills:

"There is some danger of throwing the baby out with the bath water," he said.

"This would be unfortunate. But insurers could also make the case that it is providing capacity at a time when there is the biggest need," he continued.

Following Enron, he said, legislators want tighter regulations in light of the company's appalling track record.

"Enron had not paid any taxes in four of the five last years. And had hundreds of offshore transactions," he said.

Dr. Hartwig stressed that there is a distinction between reputable global players - and he cited ACE and XL as examples - which are providing a service, and operations like Enron.

Dr. Hartwig said that the insurance industry is "truly global" and although the industry saw its biggest losses post September 11, there have been no bankruptcies of Bermuda domiciled insurers.

He said this proved that having offshore insurers is "a system that works".

And he added that these companies are not attempting tax evasion, but pay taxes according to US tax law.

And he said that as of the now, more than $32 billion in new capital that has come in to the market and the bulk of money going offshore has gone to Bermuda to finance insurance in the face of the largest-ever void in capacity.

When asked if a tax bill introduced last May by Rep. Neal and Rep. Nancy Johnson - which pushed for penalties on companies that do business with reinsurers headquartered outside the US - could still be put in to place, Dr. Hartwig said: "Congress is not going to take up collateral issues with the insurance industry at this time."