Premier Jennifer Smith yesterday said the Government was calmly confident of overcoming the problems posed by the Bermuda tax issue currently before Congress.

Speaking to over 200 delegates on the opening day of the International Captives Congress which is being held at the Fairmont Southampton Princess, Ms Smith said that the Government had spent years developing relationships and contacts in the US which allowed them to feel that the outcome of the issue would be favourable.

Ms Smith said: "Thus far, I can assure you we are completely calm and completely confident of overcoming this latest threat to our wellbeing.'' Four American insurance companies have been lobbying Congress to block what they call a `tax loophole' which they say allows an unfair advantage to Bermuda-based insurers as they do not have to pay income tax.

A bill is now before Congress, and the bill's supporters are confident it will go through by the end of the year.

It is aimed mainly at ACE Ltd and XL Capital who have recently bought over US insurance companies, and their new US rivals are crying foul over their tax status.

Ms Smith, speaking about predicting the future, said: "Looking for the moment just at the insurance industry, and at trends that tell us what potential risks may jeopardise its future, I am aware of moves in the United States by some of the big domestic insurers to petition Congress in relation to Bermuda's major reinsurers, who happen to have US subsidiaries.'' And she said that these moves pose a real threat to island, the reinsurance industry on the Island, and to captives.

Premier: Gov't confident of overcoming US tax threat "I am very conscious of the possibility that any adverse development in this matter could affect Bermuda's economy, in so far as our economy is allied to the reinsurance companies.

"I am also conscious of the affect these moves could have on reinsurance capacity for some of the captives represented here today.'' She added that both in the field of a politician and in the insurance world, there is an element of risk, but the issue was to analyse the risk and then to "act on that analysis courageously.'' She added: "This is no blithe assurance. I have just returned from RIMS and a UK /Caribbean Conference in London where the OECD were present.

"On both occasions I put forward Bermuda's case. I was pleased to hear Philip West of the OECD urge other Overseas Territories to `follow Bermuda's lead.' "You can rest assured that we take such developments seriously and we continue to work with our colleagues in the industry to demonstrate that Bermuda-based insurance companies are every bit as deserving of even-handed treatment as any other international company.

"We are ready and able to face the issues politically and we have spent many years developing relationships and connections in the US that allow us to feel confident of a favourable outcome.'' She added: "We face this latest risk with the insight and within the context of years of close dealings with our major neighbour.'' Ms Smith also invited any delegates attending the conference to bring their thoughts on the industry to herself or Government ministers.

"If there are any matters arising out of the programme which you would like to discuss with the Government, please feel free to communicate directly with me, or with any of my Ministers.'' But she added: "I must warn you -- however -- that I view your deliberations, through the eyes of a politician: As one charged by the electors with keeping a weather eye on the ebbs and flows of the business activities on which our Island economy depends.

"In a sense, it is my duty to gauge from your discussions what trends there may be within your industry, which will affect my country in the future.''