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Komfie Manalo, Opalesque Asia:

United States Senator Ron Wyden on Thursday proposed a bill before the Senate Finance Committee requiring owners of hedge-fund backed reinsurance firms to pay more taxes or shift the focus of their portfolios, reported Bloomberg.

Wayden said, "For over 10 years now this loophole has allowed some hedge fund investors to avoid paying hundreds of millions of tax dollars. It’s time we shut it down for good."

Hedge fund managers usually dodge paying higher taxes from the profits they earn from their hedge fund operations, and also postpone paying the bills indefinitely by channeling their funds through offshore reinsurance companies, including Bermuda and other countries.

Hedge fund managers, including John Paulson, Dan Loeb and David Einhorn, have set up reinsurers outside the U.S. to take on risk from primary insurance firms. They claim these reinsurers are legitimate operations and were not set up to avoid paying higher taxes in the U.S.

Under Wayden’s proposed legislation, reinsurers will only be recognized as a legitimate business if its insurance liabilities are more than 10% of the company’s assets. The bill proposes that if the ratio of insurance is between 10% and 25% of assets, the determination for tax purposes will be based on "facts and circumstances," Wayden proposes.

"Legit......................

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