captive insurance business away from offshore domiciles like Bermuda. They want to establish a captive domicile of significance in New York, through new legislation that is being proposed.

Bermuda insurance industry executives are carefully monitoring the proposals.

The head of the local captive association admits that it is worth watching the state's development of the proposals.

Bermuda Insurance Management Association president, Mr. Dennis Higginbottom, senior vice president at American International Company Ltd., said: "We are aware of it. I don't know how long it is going to take them to develop some legislation to allow that to happen.

"But even when they do that, it would be interesting to see if they do anything significantly different say from Vermont, which would attract more companies.

"It wouldn't be a matter of any real concern for us, because it would become another onshore domicile. It does have certain attractions, because it is New York. It already is an established insurance centre.

"Whether they create any additional incentives compared to the regulations as they exist in Vermont or Bermuda, remains to be seen.'' New York State regulators are keen to open that jurisdiction to a whole new world of captive insurance opportunities. Governor George Pataki is intent on breathing new economic life into the state.

A captives bill is being proposed in the coming months for the state legislature and there would have to be significant concessions made to create an environment for substantial captive formations.

But industry professionals are not convinced the legislation would have the required backing.

Mr. Higginbottom noted: "The proponents would have to convince the rest of the state legislature that it was a good idea, in the same way that they did in Vermont, Colorado or any other state. It's a states issue. It doesn't affect the Federal tax provision.

"But there is a lot more than the tax issue that will determine where a captive will be domiciled. There are the costs and geography and other things.

When we say that New York is an insurance centre, for example, we are really talking about New York City, not all of New York State.

"We really will have to wait to see what they are proposing. The fact that they now think that they would like to attract captives to be domiciled in that state, isn't of itself meaning that they will actually produce something that is broadly attractive.''