The Bermuda tax issue appears to have died a death in Washington, according to leading analysts in the United States.

A group of US insurers had lobbied Congress to plug a so-called "tax loophole" which they said allowed Bermuda-based reinsurers to dodge paying income tax in the States last year.

Last year the Bermuda tax issue hit the headlines when the lobbying of Congress led by Hartford, Kemper Liberty Mutual and Chubb was broken in the New York Times.

News of the alleged unfair treatment of US companies was splashed across newspapers in the United States and trade journals around the world. It also dominated the 2000 RIMS insurance industry conference.

Last year the lobbying turned into a bill, but Congress was suspended before it could be tabled.

This year, again, the lobbyists wanted to push a law that would penalise insurers - but now in all low-tax jurisdictions - doing business in the US.

But now it appears the motion will now not go through and will remain as a dream of the Chubb-Hartford gang.

Analysts Lehman Brothers said: "No news is good news, which is what we learned is on the legislative agenda for property/casualty insurers when we visited Washington DC, and met with trade groups, lobbyists and congressional staffers.

"Even the highly publicised efforts of Hartford and Chubb to push a law that would penalise insurers in low-tax countries doing business in the US looks like it will remain restricted to posturing by hired public relations firms."

The analysts said that the news was particularly good for Bermuda-based companies like XL Capital and ACE Ltd "that are often the legislative predatory focus of lobbyists".

The analysts said that the "no change" should benefit most insurers because it will allow them to focus on taking advantage of higher prices and improving profitability of their businesses.

The analysts said that the vast majority of lobbying efforts are currently centred on maintaining the status quo and seem to be focused at state level.

They added: "Furthermore, the change in control of the Senate to the Democrats has made it less likely that many bills will be passed in the near future."

The Bermuda tax issue hit the headlines for most of last year. The onshore insurers complained off-shore companies can unfairly reinsure long-tail insurance business from the United States to a low tax company abroad and benefit from lower taxes on interest income in their home country.

The off-shore world said that there was nothing unfair about a country with a lower tax rate, adding that the US has a lower tax rate than many other countries.

They also said that the offshore companies under attack - principally ACE and XL - do business in many different countries where they pay taxes.

The pro off-shore analysts said that there will probably be continued efforts to entice legislators to propose a bill, but "those efforts will largely fall on deaf ears listening to more interesting ideas".