a tax loophole that allows insurance companies to avoid paying millions of dollars in federal taxes by relocating their firms offshore.

The Treasury Department estimates that the government could lose up to $7 billion a year in tax revenue if all property and casualty insurers took advantage of the loophole.

According to a news release from a US corporate PR firm yesterday, at a Senate Finance Committee hearing yesterday on corporate tax shelters, Sen. Moynihan (D-New York), ranking member of Committee, Lindy Paull, Chief of Staff to the Joint Committee on Taxation, and Jonathan Talisman, acting assistant Secretary of the Department of Treasury, all expressed concern about a tax loophole that permits insurance companies to avoid federal taxes by moving to Bermuda or being acquired by a Bermuda company.

The loophole has been featured in articles this week by The New York Times and The Wall Street Journal.

The articles describe in detail a tax haven transaction in which a handful of insurance companies have avoided taxes on investment and underwriting income by reinsuring their business in a tax haven like Bermuda.

Ms. Paull stated that the tax loophole "is a matter of concern'' to the Joint Committee on Taxation, and termed it a device to move investment income overseas. She said that while no solution has been reached, the Joint Committee is working on the issue.

Mr. Talisman said the Treasury Department is concerned as well, and the Treasury is currently meeting with all affected parties.

Senator Moynihan expressed his confidence in the Committee Chairman, Senator Roth (R-Delaware) to address the problem, and pledged his support to resolve the matter.

AP reported separately yesterday that while Sen. Roth sees coporate tax shelters as a serious problem, he stopped short of supporting the Clinton administration's call for Congress to pass a broad new law to combat them. He said the focus of any law should be greater disclosure of such transactions to the government and tougher penalties on the promoters and advisers of tax shelters.

AP said President Clinton wants a new law defining a wrongful corporate tax shelter as an arrangement that wouldn't make economic sense without the tax benefits.

That definition is now used by courts in deciding tax shelter cases but has never been part of US tax law.

US Treasury Secretary Lawrence Summers is pushing for Congress to impose a 25 percent excise tax on the marketers and buyers of tax shelters and an increase in the penalty for corporate tax underreporting from 20 percent to 40 percent.

The panel holds a second day of hearings today.

BUSINESS BUC