A secure solution to the problem of copyright infringement and content authentication is to carry out image watermarking in secure signal processing (SSP) domain. Homomorphic encryption is considered one such solution for image watermarking in this domain. The Paillier encryption is found to be suitable for image processing applications in general and for watermarking in particular. In this article, a detailed investigation is carried out by using Paillier cryptosystem for twelve different color images in a compressed domain. The compression of the host images is carried out by SPIHT (Set Partitioning in Hierarchical Trees) coding. The visual quality of the images post embedding and image processing attacks is assessed by using two full reference metrics, Peak Signal to Noise Ratio (PSNR) and Structural Similarity Index (SSIM). The performance evaluation of the Paillier cryptosystem vis-à-vis watermark application development is carried out by computing three benchmark metrics: number of pixels change rate (NPCR), unified average changing intensity (UACI) and encryption speed.