Risk and Insurance Management Society, Inc. (RIMS), a prominent insurance industry organisation, has announced their opposition to the proposed Reinsurance Tax Equity Act of 2001 (H.R. 1755), also known as the "Bermuda loophole bill".

The bill - which captured business headlines for much of 2000 - was introduced by a group of US based insurers who lobbied congress to plug a tax loophole system which they said was allowing Bermuda based reinsurers to avoid income tax in the US.

RIMS vice president of external affairs Michael Phillips said that RIMS members have an inherent interest in maintaining a competitive and innovative global insurance and reinsurance marketplace and he believed H.R.1755 would undermine and disrupt this marketplace.

In their statement last week, RIMS set out a number of principles on which they made their decision to oppose the legislation. One principle was that actions limiting access to reinsurance capacity should be avoided.

The statement says: "Maintaining a vigorous reinsurance marketplace is essential in order to relieve market pressures on pricing and capacity which could prove devastating for business."

Another principle was that protectionist measures in any country should be discouraged. The RIMS statement continued: "RIMS is opposed to any legislation that encumbers free market movement and transfer of risk that is vital to a sound global insurance and reinsurance industry.

"In its current form the bill extends a protectionist arm against reinsurance companies in a limited number of nations, placement that would work to the advantage of US businesses and to the disadvantage of US based companies placing reinsurance with their parent companies in foreign jurisdictions."

A third principle was that premiums cover legitimate business and should remain deductible for tax purposes. The RIMS statement says: "H.R.1755 would reduce the pool of global funds that cover losses for organisations and individuals. In addition, if the taxability of premiums is eliminated, insurance rates will increase.

"As a result, insurance industry solvency may be impacted, hampering the ability of risk managers to correctly gauge the financial health of insurers."

RIMS also believe that stability in tax law and insurance regulation is vital to maintaining a robust and attractive market.

The statement says: "Where tax and insurance legislation have considerable bearing on the availability of reinsurance, such regulation fails the best interest of the businesses transactions are designed to protect."

RIMS member companies include 84 percent of the Fortune 500 companies and are responsible for purchasing the majority of commercial insurance coverage in the US.

RIMS was founded in 1950 and is a not-for-profit organisation dedicated to advancing the practice of risk management, a professional discipline that protects physical, financial and human resources.

Membership includes industrial, service, non-profit, charitable and governmental entities which make up the 7,500 individuals representing over 4,000 member companies in 88 chapters across the US and Canada.

More than 50 staff based in New York serve society members and inform the risk management community of the latest legislative and regulatory developments on state, provincial and federal levels.

Next year's annual RIMS conference and exhibition will be held in New Orleans from April 14 to 18.