one step further towards adoption this week when it was passed by a meeting of the NAIC's Special Issues E Committee in Boston.

The Act, which still contains a clause including offshore captives in its measures, will now go before the NAIC's Executive Committee at its December meeting in Hawaii for approval.

An eleventh-hour exemption for offshore captives, as has been put in for US on-shore captives, is considered unlikely because the Executive is believed to have never before turned down one of its committee's proposals.

The purpose of the Act is to tighten up the reporting procedures of offshore captives which use US insurance companies as a go-between or `front'.

Typically, the offshore captive buys insurance from the fronting company which then cedes all or most of the business to the offshore company.

Most captives in Bermuda use fronting arrangements to conduct their business.

Registrar of Companies Mr. Malcolm Butterfield, who returned to the Island yesterday, said Bermuda, other jurisdictions and industry lobbyists were still pursuing for modification of the definition of a captive and for exemption from the Act.

Asked what the likelihood of achieving a change was at the executive level, Mr. Butterfield said: "There is always a chance but I would not want to rate it. To say that it is an automatic done deal is not fair in my view. You will still see efforts by industry representatives and regulators to pursue those areas in the model act which they believe still need refining.'' A senior player in Bermuda's captive industry, who did not want to be named, said yesterday that there would be no great material impact on jurisdictions like Bermuda if the Act is passed.

But one of the most serious concerns is how the passing of another regulation may alter the international insurance world's perception of the Island.

"It's not really a big thing for the existing single parent captives in Bermuda,'' said the insurance source. "Effectively, there's little or no change for them.

"The requirements they will have to comply with are similar to those that have been passed before.'' He said that onshore domiciles in the US could use this proposed new legislation in an attempt to persuade new companies to come to their jurisdictions instead of going offshore.

But he added: "We have such great momentum at present that I believe we will just blast through this one. There's nothing really in it that will have a clear impact.

"The net result for the big fronting companies is, effectively, no change.

However, there are some smaller sectors which might be impacted.'' Companies affected most are thought to be association captives and those entities which also write third party business.

The proposals will make it more expensive for captives to operate. There are fears the measures could persuade some existing or new offshore captives to set up onshore.

Mr. Butterfield said: "I have always taken the view that while it is a disclosure bill it certainly will not have a major negative impact on the captive market. There will be ways to deal with it in an effective and positive manner.'' Mr. Malcolm Butterfield.