The boss of the largest Bermuda-based insurance company remains hopeful that US lawmakers will not back President Barack Obama's proposed changes to the tax code that would raise the amount of US tax paid by some of the Island's insurers.

Mike McGavick, chief executive officer of XL Capital Ltd., said he was "not ready to concede" that the administration's plan would become law because the imminent political debate should illustrate that it would be "self-defeating" for the US.

In his budget proposal last week, President Obama announced plans to increase the scope for US tax to include some of the premiums collected by US subsidiaries and ceded to their non-US parents.

Several Bermuda insurance groups, including XL, would be impacted, should the change be enacted.

The Obama proposal would have to clear congressional hurdles before it could became law and his Democratic Party colleagues have a majority in both the House and the Senate.

Though its emphasis on affiliated reinsurance resembles the Neal bill, which was tabled last year in the House of Representatives, the Obama plan's scope is narrower.

The Association of Bermuda Insurers and Reinsurers (ABIR) has argued that the Neal bill would lower reinsurance capacity and result in US consumers paying higher premiums.

"I would not speculate what might come about as this is just the beginning of a fairly intense process and it's way to early to judge what will happen," Mr. McGavick said.

As a former chief of staff to US Senator Slade Garton and an unsuccessful Republican candidate for a US Senate seat in 2006, Mr. McGavick is well versed in the ways of Washington.

Countries like the US and the UK who employed protectionist measures in an attempt to protect domestic interests were "behaving in a short-sighted and self-defeating way", Mr. McGavick said.

"If we have learned anything from the global financial crisis, it's that we should have more sources of finance, not fewer," he added.

"Any decision taken to reduce the number of financial centres like Bermuda makes the world a riskier place.

"When you look at the contribution Bermuda makes to managing catastrophe risk in the US, it is clear that it would be very short-sighted for the US to try to regulate the global reinsurance market in a way that would make coverage less available, especially in an economy that is trying to rebuild itself."

Mr. McGavick hopes the debate will take a long hard look at the impact of a plan to raise more taxes from non-US reinsurers.