(Bloomberg) — The IRS's scrutiny of tax avoidance in offshore locations has discouraged bidders from taking over reinsurers, potentially reducing the companies' value.

Montpelier Re Holdings Ltd. and Platinum Underwriters Holdings Ltd., both based in Bermuda, have each said in recent regulatory filings that potential suitors backed away last year because of risks tied to taxes.

Lawmakers and government agencies have been seeking to limit what they see as loopholes. Senator Ron Wyden pressed in June to crack down on the use of reinsurers as tax shelters for hedge-fund investors and managers. Then in September, Treasury Secretary Jacob J. Lew issued rules to discourage the tax-avoidance technique known as inversions — including language that some said might prevent legitimate insurance mergers.

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