A controversial bill aimed at raising taxes on Bermuda-based insurers operating with the US has come under fire from one of the Island's top re/insurance groups.

The legislation, which was introduced late on Thursday by Representative Richard Neal (Democrat, Massachusetts), chairman of the Sub-committee on Select Revenue Measures of the House Ways and Means Committee, would serve to increase the effective US tax rate for the Island's insurance companies with subsidiaries in the US if passed.

The Coalition for Competitive Insurances Rates (CCIR), which includes the Association of Bermuda Insurers and Reinsurers (ABIR) as a member, has labelled the bill as "anti-consumer and ant-competitive", saying it would drive up insurance rates for consumers by reducing competition and critical US insurance capacity, in a statement released on the same day.

"Only a handful of very large, very profitable US insurance companies would benefit from this bill. In contrast, the economic data make clear that American consumers and businesses would pay a steep price if Representative Neal's proposal becomes law," said Bradley Kading, president of ABIR. "This legislation represents a punitive and unnecessary tax aimed at benefiting some competitors at the expense of others."

A recent study by the Brattle Group, an economic consulting firm based in Cambridge, Massachusetts, found that the proposed legislation would cost consumers more than $10 billion per year and would reduce US reinsurance capacity by 20 percent, most significantly in disaster-prone states like Florida, Louisiana and California, according to CCIR. The group said insurers and consumers in these areas say that the Neal bill puts their states at risk.

Earlier this year, the Senate Finance Committee received almost 40 individual opposition letters in response to a staff draft of legislation similar to the Neal bill, with numerous organisations and individuals, including state insurance regulators, consumer groups, state legislators, trade policy experts, European governments and business owners expressing their views against the proposal.

Opponents of the bill say that this legislation is especially unnecessary because foreign-based insurers are already subject to a US insurance excise tax and their US subsidiaries pay US income taxes.

"Rep. Neal's bill is a protectionist measure that will hurt American consumers. It's likely to send insurance rates soaring for the very consumers who can least afford big rate increases right now," said Eli Lehrer, a senior fellow with the Competitive Enterprise Institute.

But William Berkley, chairman and CEO of the WR Berkley Corporation, Greenwich, Connecticut, said in an interview that in criticising the legislation, "Bermuda reinsurers are using scare tactics", according to National Underwriter Property And Casualty Insurance News.

He said that the US represents almost half of the property and casualty insurance premiums written in the world. "These people with all this capital are not going to close their companies," he said.

Regarding the claim that the legislation would make it more difficult and expensive to provide insurance in catastrophe-prone areas, Mr. Berkley said Bermuda insurers primarily write casualty insurance, not property insurance, and then reinsure it offshore with an affiliate.

"This does not involve property insurance used to insure homes and businesses," he said. "Bermuda people are just trying to confuse the issue."