in the United States will not be exempted from new legislation being drafted by the US-based National Association of Insurance Commissioners.

That was the message yesterday from the NAIC following a meeting of its Reinsurance Task Force held earlier this week.

Mr. Steve Foster, president of the NAIC and chairman of the Reinsurance Task Force, said offshore jurisdictions like Bermuda would not be exempted from the proposed new law.

"If the fronting carrier is dealing with a single parent captive domiciled and incorporated in a US state they are exempted from this model act,'' said Mr. Foster, adding that, clearly, Bermuda did not qualify on these grounds.

The NAIC is currently drafting a model fronting law to tighten up the financial reporting measures of licensed insurance carriers in the US which act as "fronts'' for offshore captives to whom they reinsure all or most of their business.

Many of America's top Fortune 500 companies have set up captives in Bermuda to insure themselves against many different types of business risk.

It is typical for US owners of Bermuda captives to use a separate US insurance company as a go-between or "front'' when dealing with their captives.

This involves the fronting company reinsuring all or most of its business with the captive in Bermuda.

The NAIC is worried about its lack of power to seek information from these fronting companies.

It is drafting a law which, if adopted by US states, will give it the power to obtain from fronting carriers financial information of transactions with captives above a certain threshold.

"The reporting burden will be on the licensed carrier (the fronting agency), not the captive,'' said Mr. Foster.

He added: "Many offshore centres have privacy laws which means that the NAIC cannot get the financial information it sometimes needs.

"This model act is meant to bridge the difference, not to penalise or adversely affect captives in other jurisdictions. Nothing we're doing puts a direct burden on captives.

"As far as I'm concerned, I think we've put out a reasonable approach given the differences between how the different US states deal with each other and how we deal with other jurisdictions.'' The model act, which still has some way to go before being adopted, may eventually lead to foreign jurisdictions renewing their strict privacy laws, he said.

Yesterday, Mr. Brian Hall, chairman of Bermuda's Insurance Advisory Committee, praised the efforts of Bermuda's Registrar of Companies, Mr. Malcolm Butterfield, in making the Island's concerns known to the NAIC.

Mr. Butterfield has attended several NAIC meetings, including the one held on Monday and Tuesday of this week, which he addressed for about a half hour.

"Mr. Butterfield has spent a considerable amount of time at these various meetings and has actively participated in the deliberations, representing Bermuda's interests,'' said Mr. Hall.

"He represents Bermuda extremely well at these meetings with the US insurance commissioners.'' Mr. Butterfield was due back in Bermuda last night and will report his findings to the Island's insurance leaders over the next few days.