Wait Till Dec. To Lobby U.S. Tax Issues, Insurers Advised

She told National Underwriter that she understands the administration does not intend to do any "surgical tweaks to one part of the [insurance] industry or the other, because the minute you step on that part of the balloon, the air goes elsewhere."

Ms. Gainer added that it's important to step back and ask, "What are we trying to achieve in a tax code, what's fair to the people who live here and pay taxes? What's fair to the businesses that employ people, and how do we strike that balance?"

Several pieces of legislation are currently being considered, she said. One is the insurance bill introduced in 2008 by Rep. Richard Neal. D-Mass., to amend the tax code to disallow deductions for excess non-taxed reinsurance premiums for U.S. risks paid to affiliates.

Mr. Neal's bill is due to be reintroduced this summer, said Ms. Gainer, explaining that the congressman has said $34 billion in reinsurance premium tax revenue was diverted in 2007 and his bill would generate $34 billion in additional annual revenue. The bill has not been vetted by the Congressional Budget Office.

Another bill Ms. Gainer mentioned is the Stop Tax Haven Abuse Act, introduced in March by Sen. Carl Levin, D-Mich. She said Sen. Levin estimates the bill would bring $100 billion in additional revenue to the U.S. tax system annually. The bill also has not been vetted by the Congressional Budget Office.

Ms. Gainer was quick to point out that "when you look at any of these pieces of legislation, you can't look at them in isolation."

She noted, "You have a massive overhaul of the U.S. regulatory system for banking and insurance. You're potentially considering a national federal charter for insurance for the first time. You're looking at the viability of solvency laws in the states, and you have an incredible amount of government spending to prop up and revive the economy–that has to be paid for." The current administration, she said, is looking to strike a balance.

"I don't think it makes as much sense now to focus on specific pieces of legislation. It makes a lot more sense to focus on what is the administration trying to accomplish."

The administration has "a tremendous amount of public support. They have a lot of smart people working in the administration, and that's going to be the seminal piece that comes out," she added. "We need to see what's included in that Dec. 4 memo, how have they delineated their priorities and what does that mean for anyone interested in this issue going forward."

She said that beyond captive insurers, insurance companies and reinsurers, "You're talking about the entire economy, because [the bill] will address individual income taxes, corporate tax, the issue of offshore versus onshore domestic domiciles."

Ms. Gainer added that the industry issues are complicated and that those making decisions might not understand them. However, "in fairness to the U.S. Congress," she said, "they have probably 50 things they need to be experts in."

"As we know, I've been in this industry eight or nine years. It's not breezy. It's very difficult to understand some of these concepts." The more complicating factor, she said, is "that even if you do understand what it does to an individual set of firms, you don't understand all of the ripple effects it has in the rest of the U.S. economy. That's why I think there will be a chilling effect on legislation, based on the fact this memo is coming out on the fourth."

The bill also will address treaties the U.S. has with specific countries. "It's very telling to see that the U.S. is now renegotiating its tax treaty with Switzerland–announced this past Friday," she said.

Organizations that may have left Bermuda, seeing it as a "suboptimal environment," in favor of Switzerland will have nowhere to hide, "nor should they." While there is a lot of fear about change, if the only value a jurisdiction brings is "the avoidance of U.S. tax, they're in serious trouble and they should be," she said. "If you are offering something else of value and people are coming anyway, that's great, but that cannot be the only thing you bring to the table."

In the case of Bermuda, she said, "you have an incredibly sophisticated financial economy." She explained that other clusters of expertise exist, such as the textile industry in Milan, the design industry in France and Silicon Valley in the U.S.