The Bermuda insurance sector has dodged a potential bullet from the US with the news that President Barack Obama did not include the tax code change that many on the Island had feared in his plans to clamp down on offshore tax avoidance.

When he revealed details of the plan he hopes will raise $210 billion in extra taxes on Monday, Mr. Obama made no mention of a change championed by his Democratic Party colleague Congressman Richard Neal, who has tabled legislation that would curb the ability of non-US insurance groups to cut their tax bills by ceding US premiums to affiliated reinsurers offshore.

A US Treasury official told The Wall Street Journal that Mr. Obama had not yet taken a position on the reinsurance issue. "We are still reviewing that and have not yet come to a decision on it," the official said.

Bradley Kading, the man leading the Bermuda insurance market's lobbying effort in Washington, said of the omission: "It's a long fight. We've just passed one more milestone in the road. The US government is hungrily seeking revenue from all sources."

Mr. Kading is president of the Association of Bermuda Insurers and Reinsurers (ABIR), which co-sponsored a report by respected economic analysts the Brattle Group, published early this month, which suggested that enactment of the Neal Bill would increase US consumers' annual insurance bills by up to $12 billion.

"We think there is a recognition in the Administration that the proposed discriminatory reinsurance tax is a complex issue and needs more study," Mr. Kading said yesterday.

He added that 38 opposition letters from diverse groups that had been filed to the Neal legislation, as well as the Brattle Group's analysis were "making an impression on policymakers".

Mr. Kading has distributed the Brattle report among US policymakers.

"They've asked for more time to study the report and some have asked for additional meetings with the study authors which include Professor David Cummins," Mr. Kading said.

"We continue to make our case in opposition to the proposed discriminatory reinsurance tax. We have a diverse group of coalition members including consumers, regulators, state legislators, foreign governments, free market groups, US ceding insurers and international insurers and reinsurers.

"Policymakers are concerned about bills that create the potential for a trade war and that unnecessarily increase consumer insurance costs."

Some measures proposed in the Obama plans would impact companies and subsidiaries of US companies based in Bermuda, however.

One such proposal aims to raise $3 billion by limiting companies' ability to transfer intangible property such as trademarks and patents to low-tax countries.

The budget also proposes limiting interest deductions for US companies nominally headquartered in places such as Bermuda. This move would aim to raise $1.2 billion over the next decade.