The proposals have been mooted for some time on the back of US President Barack Obama’s pledge to address the issue of American premiums being channelled to offshore centres such as Bermuda and their tax free environment.

But Bermuda is fighting back and some of its leading figures have said the repercussion of any such move would be a withdrawal of capacity for many volatile US risks and the ensuing price hikes for what cover was left available. 

Chairman and CEO of Ariel Capital Don Kramer told delegates at the Houston Marine Insurance Seminar that it was not the tax free status which made Bermuda attractive for underwriters but the ability to underwrite risks which the US regulators made difficult for domestic insurers and reinsurers to assume.

He added it was such risks on which the Bermuda market had been built but added moves by US firms to seek a tax on premiums ceded to international reinsurers were wrong.

Mr Kramer said it was not the tax free of the island which had been behind the growth of reinsurers in Bermuda.

 “The dysfunctional regulatory regime in the United States was a primary driver of the growth of Bermuda as an insurance and risk centre,” he told delegates. “Bermuda is a centre which takes volatile catastrophe risk - risk which the US companies are reluctant to get into.”

He cited WR Berkeley owner William Berkley as a leading proponent of a scheme which would see reinsurance premiums ceded to international insurers taxed in the US.

“He is not a friend to Bermuda,” he said. “He has spoken of creating a level playing field. He has to remember when you cede premium you also cede risk. But if such a taxation scheme was to be implemented it would see a withdrawal of capacity for catastrophe risk in the United States and Texas. It would create a significant shortage of available cover. It would also see rates for that limited cover available increase significantly.”

Mr Kramer added: “What we have to remember is that Bermuda has a reputation as to how it handles volatility.”