rivals. But now that advantage could be under threat from a meeting in London.

Ahmed ElAmin reports Bermuda's insurance industry is under threat from moves by onshore countries to wipe out the tax advantages of offshore territories, according to a leading trade publication.

Bermuda's low tax regime is facing scrutiny from the Organisation for Economic Cooperation and Development (OECD), the European Union (EU) and G7 member countries. The organisations claim offshore tax havens like Bermuda compete unfairly for international business with their members.

The UK's overseas dependent territories, including Bermuda, are attending a meeting in London next week to discuss the issue and what moves to make in the face of the assault. In an editorial yesterday Insurance Day says the meeting could "signal the beginning of the end of the extraordinary tax advantages available in Bermuda and other places''.

The newspaper said the tax developments had serious implications for the insurance industry, especially in Bermuda.

"It is ironic, therefore, that three years ago Bermuda rejected independence in a referendum, a decision which was warmly welcomed by the Island's insurance interests,'' the newspaper stated. "Had Bermudians voted the other way, they would now surely be in a stronger position to resist attempts to give up their zero corporate tax status.'' The newspaper noted that Bermuda's government and the insurance companies argue that the lack of corporate tax is not the only reason for the successful development of the industry but "the fact is that Bermuda-based insurers are often more profitable than their onshore rivals who will normally pay at least a quarter of their profits in tax''.

Insurance Day said ACE Ltd. and Exel Ltd. were able to acquire four Bermudian insurers without competing bids from outside the Island.

"The explanation is simple,'' the newspaper stated. "An onshore company acquiring a Bermudian insurer would almost certainly be taxed on profits from Bermuda. Evidently, once Bermudian companies are stripped of their tax advantages, they are not very attractive buys. It follows that it must become more difficult to attract capital to Bermuda if the potential returns are likely to be eroded by tax.'' The newspaper noted existing companies were "unlikely'' to flee the Island since "Bermuda at worst will become no less fiscally unattractive than onshore alternatives''.

Exel spokesman Gavin Arton said the company was waiting to see the outcome of the London negotiations before making any comments about the possible implications.

"We clearly have to wait and see,'' he said yesterday.

He added that companies like Exel already paid corporate tax on the profits of their onshore subsidiaries.

BUSINESS BUC