Battlelines will be drawn in Washington DC this morning as Bermuda's reinsurance industry seeks to see off the latest attempt to change US tax and policies towards offshore reinsurance providers doing business in the United States.

US senators are to hear an appeal by a group of US-based insurers seeking to change beneficial tax and financial arrangements enjoyed by Bermuda reinsurers doing multi-billion dollar business in the States.

If successful in changing US policy the protectionist move by a group headed by William Berkley, of Connecticut-based property and casualty insurer WR Berkley Corporation, could have a major impact on Bermuda reinsurers as well as similar companies based outside the US.

No policy will be changed today as the session is an informational hearing by the US Senate Finance Committee, however it could act as a pointer to the way ahead for the latest attempt to kerb the benefits and advantages of non-US reinsurance companies.

Amongst eight options for change mooted are increasing the excise tax on premiums paid on reinsurance policies issued by foreign insurers, and limiting the amount of business that can be ceded from affiliate insurers in the US to overseas reinsurers.

The Association of Bermuda Insurers and Reinsurers (ABIR) is being represented at the hearing by Ariel Re chairman and CEO Donald Kramer.

In his speech he will tell the finance senators: "Protectionist measures targeting tax increases at non-US insurers will have counterproductive effects in the US economy - they will make insurance more expensive and harder to buy.

"The additional tax costs will not ultimately fall on the non-US insurers themselves, but rather on US citizens - businesses and consumers."

His argument is backed up by letters from Bill Newton, of the 30,000-member Florida Consumer Action Network ,and Michael Liebowitz, the president of the Risk and Insurance Management Society.

Mr Newton, in a letter to Senator Bill Nelson, warns that proposed revenue raising amendments that promise more tax revenue for the US Government at the expense of non-US reinsurers will actually be paid for by US consumers who will find themselves facing even higher insurance premiums than today because of the knock-on effect of reduced insurance capacity and higher charges as the reinsurers re-shape their business to accommodate the higher tax burden and the lower percentage of business than can be ceded to them.

Likewise Mr. Liebowitz said: "We argue that targeting the non-US reinsurance market for an increase in their taxes would reduce competition and drive up prices for policyholders."

At the heart of Mr. Kramer's presentation on behalf of ABIR is the historical benefits that the US has gained from the ability of the offshore reinsurance sector to respond to crisis such as Hurricane Andrew in 1992, the 9/11 terrorism attacks and the massive US insurance losses from the hurricane seasons of 2004 and 2005.

The ability for the offshore reinsurance industry to react swiftly and rebuild its capital base is something that would not be achievable by domestic US insurance companies, he will tell the committee.

Mr. Kramer, who is an American working in Bermuda, has experience woth two Bermuda reinsurance start-ups and one US reinsurance company.

In his speech, to be delivered today, he says: "Why Bermuda? We are in Bermuda because we can quickly deploy our capital, form a company, get licensed and write insurance. No other jurisdiction does this as well as Bermuda.

"The insurers then deploy their capital to meet critical market needs whether in the US, Asia, Latin America, Europe or the rest of the world. Capital is not trapped in regulatory frameworks that limit the insurer's flexibility to exit or enter markets."

Points to be presented to the committee today include:

• ABIR members wrote $56 billion in premiums during 2006.

• More than 60 percent of the World Trade Center insurance claims were paid by non-US insurers and reinsurers.

• Fifty percent of claims from Hurricane Katrina were paid by non-US reinsurers (24 percent contributed by Bermuda alone).

• ABIR member US subsidiaries pay full US corporate income taxation and employ 17,000 people.

Mr. Kramer will argue that reducing the ability of non-US reinsurers to do business in the US, including upping the tax charges they face, will impact thousands of US employees and likely mean a far slower recovery for businesses and residents when they are hit by a disaster or catastrophe.

Bradley Kading, president of ABIR, said: "This is the third time this (tax/regulation change) has been tried. I would say the chances of it being changed are not good. The arguments on our side are significant.

"The US needs the market and Bermuda fills a need. There is no expectation that this new move will be endorsed."

However, the ABIR chief admits that one fear is an opponent to the offshore businesses will convince a congressman that there is a good way of securing extra tax revenue by attaching an amendment to a related piece of legislation.

Support for the maintaining of the current status quo is unanimous within ABIR, and the association has the backing of other non-US insurance and reinsurance carriers such as those in Europe who would also be affected by any changes.