The Neal bill still presents a very real and significant threat to Bermuda but the chances of it being passed this year have diminished considerably.

That is the view of Eli Lehrer, national director of the centre on finance, insurance and real estate at US think tank The Heartland Institute, who was in Bermuda this week on a fact-finding mission, meeting with the Ministry of Finance and the organisation's donors.

Mr. Lehrer told The Royal Gazette that the Island also needed to be wary of any anti-tax haven movement, but that it would ultimately be proven that it did not qualify as such.

Mr. Lehrer said that the Neal bill, which would increase taxes on reinsurance premiums ceded by US subsidiaries to their non-US parent companies, had failed to attract any co-sponsors, but the form of tax being proposed meant it remained a risk, despite a concerted effort being made to oppose it.

He said two of the big US insurance companies who supported the bill, Chubb Corporation and WR Berkley Corporation, could benefit from it by picking up business to insure wealthy owners of US coastal properties, for whom the risks may have previously been assumed by Bermuda entities, at the same time as seeing tax imposed on their competitors.

However Mr. Lehrer said if the bill goes ahead it would be as a paid for amendment to another bill such as a financial or energy bill, but it was not likely to happen before the end of 2010.

"My guess is that it won't pass this year simply because there is so much to do," he said.

"The real thing is after the Deficit Commission reports - that is where I think it can gain real legs.

"There will have to be tax increases and a tax increase like this that has concentrated benefits in the US and very diffused costs is one that begins to look attractive, although the diffused costs are much greater than the concentrated benefits."

Mr. Lehrer said that if the bill went through its potential impact on consumers could be huge, with the possibility of Florida property insurance becoming unavailable to many people. A report by the Brattle Group last year alone found that adoption of the Neal Bill could cost US insurance buyers $10 billion to $12 billion in the form of higher insurance premiums.

But he said the Neal bill was the kind of legislation that would remain a threat until the Obama administration restored some sort of fiscal balance, which could be five to six years away at the earliest.

"I think it is a real threat and I think it will continue to be for the future," he said. "I think the chances of it passing in 2010 are smaller than they were.

"Probably I would think there would be a window in August/September as government is searching for revenue and in the Deficit Commission reports, but I doubt it would be in there."

Mr. Lehrer said demonstrating the potentially adverse effect of the Neal bill on consumers would make it harder for supporters to make their case and strengthen that of those who oppose it, including groups from the right and left, as well as industry groups.

"There is not a single trade association that supports this," he said. "All of the trade associations are neutral and it is a desire on the part of a few large US companies."

Turning to the US perception of Bermuda, Mr. Lehrer said that 95 percent of Americans had no opinion and those who did probably thought any island was a tax haven, while those who had looked into it more closely were in the minority.

He said that he had noticed an increase in the promotion of the Island's tourism product within the US and Government's decision to take the four Uighurs who were released from Guantanamo Bay prison last year was seen by America as a genuine gesture of goodwill on the part of Bermuda.

Mr. Lehrer warned however that President Obama's threat to shut down tax havens made during his presidential election campaign in 2008 was not to be taken lightly. Despite Obama not making direct reference to Bermuda, it was on a list of jurisdictions taken from Internal Revenue Service court filings identified as "probable locations for US tax evasion" under the "Stop Tax Haven Abuse Act" introduced by Obama, Democratic Senator Carl Levin and former Republican Senator Norman Coleman in 2007.

"He wouldn't say it if he didn't mean it to some extent," said Mr. Lehrer. "The question is what do you mean by a tax haven?

"The tax advantages of operating here are available in plenty of other places, but the advantage of operating in Bermuda is its speed to market - there are many other tax havens on shore where the advantage is tax.

"Another factor is that Bermuda regulations are tougher than those they have in the US, including solvency regulation."

He pointed out that if Bermuda featured on a US hit list of tax havens then the likes of Ireland and countries with lower corporate tax rates should be included too and that the Obama administration was more likely to go after jurisdictions where it knew improper activity and wrongdoing was taking place.

On its side, Mr. Lehrer said that Bermuda was a wealthy country and as a British Overseas Territory was in a strong position to defend itself if it came under attack for its status.

Mr. Lehrer, who is in regular contact with the Ministry of Finance to keep updated on tax, tariff and Solvency II issues, as well as the likes of the Association of Bermuda Insurers and Reinsurers, said there were still a number of outstanding issues such as the possibility of an increase in Federal Excise Tax which could pose a threat to revenue sent to Bermuda in the future, having a similar impact to the Neal Bill.

He concluded that it was his role to educate as many people as possible about the potential impact of the Neal bill on consumers.