NU Online News Service

WASHINGTON--Proposed tax legislation aimed at offshorereinsurers "will distort the playing field" to the advantage ofU.S. insurers and increase costs for consumers, a lobbyist forBermuda companies said.

Brad Kading, president, executive director of the Association ofBermuda Insurers and Reinsurers, speaking during a panel discussionon legislation proposed by Rep. Richard Neal, D-Mass., said the taxwould cost consumers $10-to-$12 billion more annually. The reason,he said, is because the tax would drive a 20 percent reduction inthe supply of reinsurance to the U.S. market.

The discussion was part of the annual Risk and InsuranceManagement Society Inc.'s "Risk and Insurance On the Hill"conference held here today.

"The bill does not create a level playing field," Kading said."It distorts the playing field to create a protected market forU.S. insurers. It denies the ability to offset not only premium asa business deduction but also claim payments as a businessdecision," he added.

It also makes reinsurance claims paid to the insurer by theforeign reinsurer payable under the contract taxable income, hesaid.

The legislation (H.R. 3424) proposed by Rep. Neal, a seniormember of the House Ways and Means Committee, would disallow thededuction for "excess non-taxed reinsurance premiums" paid by theU.S. units of offshore insurers to offshore reinsuranceaffiliates.

The bill is being debated by the committee as part of efforts toraise revenues in order to fund legislative priorities of the Obamaadministration.

Speaking for RIMS, Scott Clark, risk and benefits officer forthe Miami-Dade County School Board and a RIMS board liaison, said,"The group has always opposed proposals to restrict market accessto insurance capacity."

Scott called the legislation "a great threat to insurancecapacity in the United States."

"Over the past decade it has been proposed several times, notsurprisingly, by a handful of U.S. insurers which seek to gain viaa protected market that would allow them to charge higher prices,"Clark said.

"Nothing could be worse for U.S. consumers," he said. "Effortsby U.S. insurers to punish foreign competitors do nothing but harmU.S. consumers, and these proposals should be rejected."

Kading said the $17 billion projected to be raised by theproposed tax over 10 years "is a black-box revenue project" that is"unbelievable." He added, "Many questions exist about how thenumber was developed."

Kading said that one myth being circulated by the domesticinsurers who he says would benefit if the new tax becomes law isthat only foreign insurers purchase reinsurance fromaffiliates.

In fact, he said, "wholly-owned U.S. insurance groups cede about50 percent of gross premiums to affiliates; non-U.S. insurancegroups, on average, cede about the same amount or less."

Lelan Daines, an assistant vice president for risk managementand reinsurance at Iasis Healthcare, based in Franklin, Tenn., saidher company may be forced to close its hospital in St. Petersburg,Fla., due to difficulty in insuring the property because of bothcapacity and price issues.

She said that if Rep. Neal's bill becomes law, it would make iteven more difficult and expensive to obtain insurance for thefacility.