THE president of the world's foremost insurance industry think-tank has called on Bermuda's insurers to lobby the new Obama administration in the face of threats to close the 'tax loophole'.

Dr. Robert Hartwig, president of the New York-based Insurance Information Institute (III), spoke to the Mid-Ocean News amid widespread media reports that one of new President-elect Obama's first tasks will be to crack down on 'tax havens' such as Bermuda.

CNN reported this week that Obama may target companies that "avoid taxes on their US business by reinsuring policies written in the US to Bermuda-based affiliates".

A bill introduced by Massachusetts congressman Richard Neal in September seeking to crack down on offshore insurers has recently gained momentum, backed by a consortium of US insurance companies.

Dr. Hartwig, who leads the think-tank's efforts to provide definitive insurance information to international governments, public and private sector organisations and the media, believes Bermuda's (re)insurance sector to be vital to the US. However, he places the onus squarely on the island's insurers to educate both the new administration and new Congress on the benefits of our international business industry.

"One of the platforms Obama ran on was to lower taxes for some and raise them for others," he said.

"It is also the case that the Federal Government is seeking revenues due to the tremendous outlay in the wake of the financial crisis. There has been discussion of closing 'tax loopholes'.

"In this instance it is incumbent on Bermuda insurers to demonstrate that they provide true value-added service to the US marketplace.

"Bermuda provides a significant amount of capacity necessary for the US insurance and reinsurance marketplace. The cases that Bermuda will make are already well defined. They need to educate the new administration on the important role offshore reinsurance plays in providing capacity. They have to educate a new Congress on that ¿ you can't do much more."

Dr. Hartwig added that Bermuda's insurers ¿ and those working on their behalf, like the Association of Bermuda Insurers and Reinsurers (ABIR) and the Association of Bermuda International Companies (ABIC) ¿ need to be aware of the groundswell of support for the other side of the 'tax loophole' argument.

"There are other companies in the US that oppose the tax treatment Bermuda enjoys," he said.

"Both sides will be working to educate different individuals in Congress and the administration on this issue. I can't speculate where this will end up. Will a change in tax code be detrimental to Bermuda? It is far too uncertain to say. What will be the treatment of offshore entities?

"Bermuda's insurance industry is one of a countless number of moving parts. The tax code needs to be addressed. Clearly when Congress eventually looks at this issue it will be complex."

Dr. Hartwig added that Bermuda's lobbying efforts must focus not simply on issues of taxation but on the vital capacity the island's (re)insurance industry provides, especially following major catastrophes.

"One argument that will be made, is that in the wake of 9/11 and Hurricane Katrina, a large amount of capital flow made its way to the US. This was incorporated in offshore entities.

"That begs another question about US insurance regulation. The capacity and ability to rapidly expand is there. That will be part of the argument for those proponents of the status quo in Bermuda's insurance sector."

He believes that the success of Bermuda's insurance industry in surviving an Obama presidency will hinge on whether the island is seen as being part of a "level playing field" worldwide.

"The administration will have to balance what has been called a harmful tax policy versus the revenue and equity issue," he said.

"Where that winds up is unclear. We don't even know who the Treasury Secretary or the head of the Internal Revenue Service (IRS) will be.

"This is one of countless issues for the new administration. Is it a revenue issue or a tax issue? Or is it part of a financial services overhaul that we know will occur in the first part of Obama's presidency?

"Insurance and reinsurance are global markets. There are domestic markets in the US who say it is not a level playing field. Whether the US, Bermuda, London or Switzerland, there should be a level playing field.

"There is no question that Bermuda provides vital capacity. It is whether tax treatment is equitable."

For more information on the international insurance industry visit the Insurance Information Institute web site at www.iii.org.