Foreign, Domestic Groups Continue Neal Bill Impact Dispute

The foreign reinsurers, through a group called the Coalition for Competitive Insurance Rates, released a YouTube video earlier this month stating that the bill would cost consumers $10-to-$12 billion annually.

The video prompted a second video by a group of domestic insurers under the name Coalition for a Domestic Insurance Industry (CDII), which replayed the foreign reinsurers' video but with an additional voiceover disputing various points.

The CDII video said the Neal bill is not a "new tax on foreign reinsurers" but rather legislation aimed at closing a loophole that allows U.S. subsidiaries of foreign-owned insurance groups to avoid taxes that apply to all U.S. companies.

The video also contends that the Neal bill will recapture an estimated $17 billion in revenue for the U.S. Treasury and will not adversely impact pricing or capacity.

The Coalition for Competitive Insurance Rates has now hit back at the CDII video, claiming that there is no tax loophole to close.

"[T]he same U.S. tax law currently applies across the board to all affiliates of insurance companies, foreign or otherwise," the group said. "This bill exists purely to drive out competition and increase profits for a handful of powerful and successful insurance companies who provide only a small percentage of catastrophe-exposed property coverage across the country."

The group added that the CDII has "painted a false picture of the current insurance marketplace by claiming that foreign-based groups enjoy a competitive advantage and incorrectly arguing that the new tax would not affect hurricane exposed property."

The bill, the group argued, will increase the cost of reinsurance generally and restrain the ability of foreign insurers' U.S. affiliates to write as much property insurance as they do.

"Foreign insurers' U.S. affiliates write 11 percent of Atlantic and Gulf Coast home insurance and 25 percent of commercial property insurance," the group said.

The group also quoted J. David Cummins of the Wharton School of Business, who co-authored a study that examined the impact of the Neal bill, as stating: "This tax is so punitive and confiscatory that it would reduce the supply of reinsurance in the United States by $19-to-$22 billion. This represents 20 percent of all reinsurance and 40 percent of all foreign reinsurance. In addition, because the tax is confiscatory, it would not raise significant new tax revenues."