Bermuda International Business Association has hit out at a United States Congress bill seeking to close a so-called `tax loophole' that allows offshore insurance companies to not pay US income tax stating that it is an attack on Bermuda as a whole and not just the insurance industry.

In a strongly worded statement BIBA also described as "protectionist'' the bill which was introduced to the House of Representatives on Wednesday night and effectively opens the battle between Bermuda-based insurers and reinsurers and their US competitors. Finance Minister Eugene Cox said last night Government would take whatever steps were necessary to ensure the well-being of the insurance and reinsurance industry and to ensure the stability of the economy.

The legislation, which some say could be passed this year, appears to target companies like ACE and XL which have recently acquired US property and casualty insurers as well as a number of US reinsurers like PXRE and Everest Re which have moved to the Island.

The move comes after US insurers -- Chubb, Hartford, Kemper and Liberty Mutual -- went to Congress to get them to pass laws which will demolish the "tax shelter in Bermuda'' and close a `tax loophole' they say will stop companies based in Bermuda but actually operating in the US to avoid paying certain taxes in America.

The bill was introduced to the body that decides on tax related matters, the House Ways and Means Committee members Nancy Johnson, a Republican, Richard Neal, a Democrat, and Robert Matsui, also a Democrat.

A spokesman for BIBA said: "The legislation introduced in the US Congress by Johnson, Neal and Matsui, appears to be a protectionist measure, backed by some US insurers, which BIBA regards as an attack on our jurisdiction as a whole and not just the insurance industry here.'' The highly influential Bermuda organisation, which liaises between Government and the private sector, added that certain Bermudian insurers had been targeted because these companies were so successful.

"We believe the US insurers supporting the bill have focused on Bermuda because the Government and business communities here have developed an environment that is extremely conducive to insurance and international business.'' BIBA slams US tax bill Mr. Cox said: "Given the importance of the insurance and reinsurance industry here on the Island, I intend to continue to monitor this matter carefully.

Government is committed to taking whatever steps are prudent and necessary to ensure the continued well-being of this industry specifically and our economy generally and to do so in continued consultation with relevant stake-holders.'' Bermuda insurance giant ACE Ltd went in swinging, saying that the move by Congress was simply "pork barrel politics''.

Introducing the legislation on Wednesday night, Mrs. Johnson urged Congress to shout down what she described as a blatant abuse of the tax code that could potentially cost the US billions of dollars.

"This loophole allows certain foreign insurers to dodge US income tax, depriving our country of tax revenues and giving overseas companies an unfair advantage over US-owned companies and their workers.

"During the past year, some Bermuda-based companies acquired US property and casualty insurers, while a number of US reinsurers relocated in Bermuda. The primary purpose of these corporate acquisitions and reorganisations was to avoid US income tax on investment income by reinsuring their US-owned subsidiaries' reserves to a tax haven such as Bermuda, which has no income tax.'' ACE Ltd has repeatedly said that they have not built their business on the basis of tax opportunism and has said that the number of `billions of dollars' is based on figures that look at an impossible scenario where every single insurer would move to Bermuda -- an option that would be impossible simply because of the size constraints of the Island.

A spokeswoman said; "The Johnson/Neal legislation is pork barrel politics at its worst. It would favour Northeast US insurance companies but jeopardise the ability of the industry to meet the capacity needs of the domestic market, particularly with respect to coverage for hurricanes, floods and other natural disasters.

"The legislation unfairly singles out Bermuda-based companies which have played a critical role in providing needed capacity for the US market. More outrageous is that this blatant singling out of Bermuda insurers is veiled as a tax equity issue despite the fact that many countries offer lower effective rates on insurers than the United States.'' She added: "The sponsor's contention that this alleged problem could cost $7 billion in lost revenue is not true. Treasury spokesperson Steve Ponser said in a March 8 BestWire story that the $7 billion is not a Treasury estimate. At this time there is no Treasury estimate regarding any revenue loss.'' XL Capital would not be drawn into the matter at this stage, although in the past they have described the move to take the matter to Congress as `protectionist'.

A spokesman for XL said: "At the moment we are not saying anything. We are studying the proposal and we will respond in due course.''