LONDON (BestWire) - As Ireland awaits a massive international loan intended to contain its domestic banking crisis, its reinsurance sector is rallying behind the country’s 12.5 percent corporate tax rate.

That rate, low by European standards, has frequently been cited as a reason why companies have moved their domiciles to Dublin in recent years. Insurers attracted to Dublin have included Beazley Group plc, XL Group plc. and United America Indemnity Ltd.

Ireland’s tax rate has been “remarkably successful” in helping to create an open, export-based economy built around foreign investment, John Bruton, the country’s former prime minister, told a London seminar. It enjoys broad support in Ireland, said Bruton, who is also a former European Union ambassador to the United States.

“The policy of low corporate taxation has existed in Ireland since 1956,” Bruton said.

The tax rate “is a central part of our economic policy,” Bruton told the audience. “It is a central part of our revenue policy. It is a central part of our policy of enabling ourselves to reduce our debts.”

Acknowledging German criticism of the tax rate, Bruton argued Ireland raises a higher percentage of its gross domestic product from corporation tax than does Germany. “It brings in the money,” he said.

The current rate will help Ireland repay what it is going to borrow, Bruton said. “It is going to stay,” he said.

Bruton is a member of Fine Gael, the main opposition party, which is expected to do well in the general elections that are considered likely in the next few months. Fianna Fail, which leads Ireland’s coalition government, has taken much of the heat for the country’s economic debacle. Fianna Fail, which has dominated Irish politics since the 1930s, recently lost a by-election in County Donegal.

Participants in the London seminar also argued that, despite the problems in the domestic economy, the internationally oriented reinsurance sector is performing well.

Bruton expressed the hope that “the current difficulties will create the political momentum for us to be able to do what we might otherwise not have done.” He suggested Ireland might have actually been better off if the crisis had come earlier. Countries in Asia and such western nations as Canada and Sweden had major financial crises about a decade ago, Bruton said. Each is now doing well, he said.

“Those financial crises were educational and structural and change drivers, which has put [these countries] in a much stronger position” than Ireland is in today, Bruton said.

Sarah Goddard, chief executive officer of the Dublin International Insurance and Management Association, said the goal of the seminar was “to inform the international marketplace here in London of what is really happening in the international reinsurance marketplace in Ireland”.

“It is pretty difficult times at the moment,” Goddard said. “There’s absolutely no way of being able to say anything else. There has been a considerable banking crisis and the economic effects of that are pretty nasty.”

The one-day conference was organised by the Dublin International Insurance and Management Association, the Dublin-based International Financial Services Centre, which houses much of Ireland’s internationally focused financial services industry, and IDA Ireland, the government-supported body responsible for seeking foreign investment.

The seminar was hosted by broker Willis Group Holdings Ltd., which provided the auditorium at its London offices. Willis itself completed the move of its domicile to Dublin this year from Bermuda.

Ireland’s economic problems are “isolated to that domestic banking sector,” Goddard said. “There’s been over-capacity in construction, which has led to a lot of empty units, half-built houses across the country,” she said.

Other areas of financial services are doing well, Goddard said. Ireland has strong positions in aircraft leasing, cross-border pension provision in Europe and international reinsurance, Goddard said.

“So there’s a lot of activity there which is getting lost in the very understandable noise at the moment about things like the IMF [International Monetary Fund] getting involved in our economy,” Goddard said.

Goddard also defended Ireland’s corporate tax rate. The consensus in Ireland, she said, is it “is here to stay”.

While “other countries may have a higher headline tax”, the tax that is finally paid after various allowances are applied may actually work out to be less than in Ireland, she argued. “What we have in Ireland is a very transparent taxation system,” Goddard said.

Goddard said reassurance on the rate has come from the IMF and within the European Union. The rate has also produced healthy tax revenues in Ireland, she said.

“Now obviously the 12.5 percent tax environment is something that’s attractive to companies, Goddard said. “But it’s part of the menu that we have in Ireland. It’s not the sole reason that a company would be located in the jurisdiction.”

Goddard expressed confidence in Ireland’s continuing attraction for the financial services sector. International business operates apart from the country’s sovereign rating, she said, while the current economic climate has contributed to a lowering of operating costs.