Offshore Insurer Tax Proposal Back On in Obama Budget

NU Online News Service, Feb. 14, 3:28 p.m. EST

The Obama administration today reinstated its call for a new tax on offshore insurers, but under a formula greater than that proposed by the administration in past years.

The latest proposal conforms to legislation supported by domestic insurers such as W.R. Berkley and Chubb.

Opponents say the proposal, if enacted, "would drastically raise insurance rates across the country."

Under the proposal, aU.S.insurance company would be denied a deduction for certain non-taxed rein­surance premiums paid to offshore affiliates.

Offshore insurers withU.S.affiliates would be allowed to offset taxes paid on revenues ceded to offshore affiliates by deducting return premiums, ceded commissions, recovered reinsurance or other amounts received from overseas affiliates.

According to the Coalition for Competitive Insurance Rates, the proposal closely resembles legislation, H.R. 3157 and S. 1693) introduced by Rep. Richard Neal, D-Mass., and Sen. Robert Menendez, D-N.J.

The CCIR cited in a statement opposing the legislation a study by the Peterson Institute for International Economics.

The policy brief, "Another Shot at Protection by Stealth: Using the Tax Law to Penalize Foreign Insurance Companies," says that "U.S. consumers who live in disaster-prone areas would suffer at the hand of Congress."