Captive insurance professionals yesterday heard Finance Minister Bob Richards predict a rise in US interest rates in the near term during a panel discussion at the Bermuda Captive Conference.

But he was challenged by one panellist when he suggested that controversial proposed US legislation that could impact Bermuda’s insurance industry would gain no traction in the US legislature.

The challenge came from Carolyn Snow, the president of the Risk & insurance Management Society, Inc. (RIMS).

Minister Richards raised the issue of a bill introduced by US Congressman Richard Neal (Democrat, Massachusetts) in the House of Representatives, varying forms of which he had taken to Congress over several years.

The legislation would raise taxes on Bermudian and other non-American insurance and reinsurance companies operating within the United States, driving up consumer insurance rates by reducing competition and critical US insurance capacity.

The Minister stated that he was less concerned about any movement with the bill than his worry over the “constant struggle to keep the brand of Bermuda pristine and untainted from mainly baseless accusations that are directed at Bermuda.

“We get put on various blacklists unjustifiably and so we have had problems with some Latin American countries because we are on some list. And it’s up to the Ministry of Finance to get us off these lists.

”With regard to the ‘Neal bill’ the Minister said that with the way the US government was structured it was unlikely to proceed.”

But the RIMS president made the point that her organisation still had some concerns that the bill will find some progress in the US legislature and her organisation was staunchly opposed to the bill’s passage.

She said: “I’m not as optimistic as the Minister is about the Neal Bill [not proceeding] because it hung out there for years without having a sponsor. He [Rep Neal] kept introducing it, but could not find a sponsor.

“But in the last six months, he has got a sponsor and it was looked at in the budget. Congress maybe sees it as a way of picking up some money to help balance the [federal] budget.

“But RIMS is very opposed to the Neal bill because we think it will have chilling effect on the market ... on capacity and on prices.”

With regard to interest rates, the Minister stated: “There has been a low interest rate environment now for three or four years. The Federal Reserve continues to push astonishing amounts of money out of thin air into the system.

“It was originally put there to build up balance sheets of banks. But most of the balance sheets of banks have been repaired, even though they are not throwing money at people like they were in the early part of the millennium.

“There are still going to be inflationary pressures that will arise out of this excessive amount of liquidity, therefore at some point in the future interest rates will go up. I don’t see any way but for them to go up. The only issue is how fast. I’m surprised that they have not been moving up already. There are some factors for that.

“But as the United States economy in particular gets healthier, the only thing that will stop interest rates rising is a major calamity in Europe or China. And I don’t see that happening.

“Without any major glitches in Europe or Far East, the balance of probability favours rising interest rates, probably slowly.”

The panel was moderated by the president of the Bermuda Insurance Management Association, Robert Paton.

Other panellists included director of risk management for Ace Hardware, William Montanez, who is also the chairman of Bermuda Captive Owners Association, and Shelby Weldon, director, insurance licensing and authorisation, Bermuda Monetary Authority.