A prominent supporter of a change in US tax policy that could impose a higher tax burden on the Bermuda insurance market yesterday said that such legislation could cause "collateral damage" in the industry if not carefully written.

Ted Kelly, chief executive officer of US insurance giant Liberty Mutual, was speaking as one of the panellists on the opening morning of the World Insurance Forum at Tucker's Point.

Mr. Kelly, whose company is a member of the Coalition for a Domestic Insurance Industry, a US lobby group which is backing the Neal bill, told The Royal Gazette: "Any bill that is passed, unless it is properly crafted, it could do a lot of collateral damage. They just have to be very careful."

A report by the Brattle Group last year found that adoption of the Neal bill could cost US insurance buyers $10 billion to $12 billion in the form of higher insurance premiums.

And those in some catastrophe-prone areas might struggle to get any insurance coverage at all as the cost of reinsurance capital rose.

The Neal bill seeks to close the loophole that allows foreign insurance groups with US subsidiaries to cut their US tax bill by ceding premiums back to their non-US parents in the form of reinsurance.

US President Barack Obama proposed something similar to the Neal bill, but aiming to raise considerably less revenue, in his national budget plan last month.

During the panel discussion, Mr. Kelly said it was clear that Bermuda companies had a tax advantage over their US rivals.

"Why are all those companies in Bermuda?," he said. "When they threaten to do something to change things, companies redomesticate. That's not because they want a change of scenery. They're playing the tax game."

He said Liberty Mutual supported the Neal bill, without pushing it. "We do need to address the fact that companies move to Bermuda and write long tail lines at a tax advantage," he added.

However, any legislation passed to change tax policy could have "unintended consequences", Mr. Kelly warned, adding: "We all need global capital for reinsurance."

Fellow panellist Brian Duperreault, CEO of global broker Marsh & McLennan and formerly CEO of Ace Ltd., said he didn't "have a dog in that fight any more".

He added: "It was not tax-driven when Ace and XL started here, it was speed-to-market driven."

Investors wanted to deploy their capital immediately in response to market conditions and Bermuda had been the best place to do that, Mr. Duperreault said.