The US Government is getting upset at the number of financial services companies setting up headquarters offshore, principally in Bermuda. The St Paul’s reinsurance arm is the latest to pull on the long socks and shorts that do for business wear on the low-taxing Atlantic island.

The St Paul reinsurance operations will become an independent company in Bermuda and raise about $1 billion in capital. The company joins dozens of other operations that have moved offshore and prompted the US Government to protest loudly about the loss of business and taxation income.

The move is a logical one for The St Paul, a big loser from the September 11 attacks. It is hoping the new capital will free up the capital it needs to expand its commercial lines and specialty property/casualty business.

Since pulling out of several countries including Australia, New Zealand, France, Germany and Spain, the St Paul has also stopped writing casualty business at Lloyd’s and discontinued its disastrous medical malpractice market.