RIMS Opposes Tax Change On Foreign Reinsurance Deduction

The Risk and Insurance Management Society Inc. announced opposition yesterday to legislation that would cap U.S. insurers' tax deductions for reinsurance paid to foreign affiliates.

Under the measure (H.R. 6969), premium payments that exceeded the industry average for each line of property and casualty insurance business would be disallowed.

Rep. Richard E. Neal, D-Mass., a senior member of the U.S. House of Representatives Committee on Ways and Means, introduced the measure Friday.

"RIMS opposes any legislation that would result in negative implications for the global reinsurance marketplace and U.S. businesses that rely on this market," Terry Fleming, member of RIMS board of directors and director of the division of risk management for Montgomery County, Md., said in a statement.

Mr. Fleming said, "It is RIMS' belief that a free and fair marketplace fosters a healthy and competitive climate for reinsurance while at the same time assures more available and affordable property and casualty insurance."

Under the current tax code, the law permits insurers to deduct reinsurance premiums paid to affiliate foreign reinsurers without any limitations. The legislation, said RIMS, would place an artificial cap on the deduction, potentially causing market disruptions.

Over the years, non-U.S. reinsurers have served as an important backstop ensuring the availability of insurance, particularly in areas prone to natural disasters, said RIMS. The organization said it opposed similar legislation in 2001 and 2007.