CCIR: Senate Finance Committee Tax Reform Draft Ignores Warnings on Harmful Reinsurance Tax
FOR IMMEDIATE RELEASE
Emily Flynn Pappas 202-448-5208 Epappas@podestagroup.com
Senate Finance Committee Tax Reform Draft Ignores Warnings
on Harmful Reinsurance Tax
Discussion draft includes provision that would increase the cost of insurance by taxing reinsurers
Washington, DC (November 19, 2013) — The Coalition for Competitive Insurance Rates (CCIR), the leading voice for continued and increased competition within the insurance industry, today objected to the inclusion of language in the Senate Finance Committee’s discussion draft of tax reform that would change the tax treatment of affiliated reinsurance operating in the United States. The decision by Sen. Max Baucus (D-MT) to include this provision in the Finance Committee’s draft ignores warnings from elected officials, state insurance commissioners, trade experts and consumer advocates that this tax would drive up the cost of insurance to homeowners and small businesses.
“This is an alarming development in the tax reform debate that could ultimately result in citizens in disaster-prone states like Louisiana being faced with higher premiums for their property insurance,” said James Donelon, the Louisiana commissioner of insurance.
The Senate Finance Committee’s stance on reinsurance closely resembles legislation (HR 2054 and S 991) introduced by Reps. Richard Neal (D-MA) and Bill Pascrell (D-NJ) and Sen. Robert Menendez (D-NJ), and included in President Obama’s current and past budget. Just last week, Rep. Dennis Ross (R-FL) recognized during a hearing before the House Financial Services’ Housing and Insurance Subcommittee the dangers of the Neal-Pascrell- Menendez legislation. In his questioning of Kean Driscoll, chief executive officer of Validus Reinsurance, Ltd., Rep. Ross asked if the reinsurance tax would limit the capacity or capability of insurers and reinsurers to take on more risk from terrorism or flooding (TRIA and NFIP). Mr. Discoll responded that reinsurers need to be able to pool risk and that any limitation on affiliate reinsurance would impede global risk pooling, fragment group capital, impede market development and likely increase the cost of insurance to consumer.
“The protectionist tax treatment of US insurers’ affiliate reinsurance would limit capacity, putting states such as Florida as risk of being ‘underwater’ without ready access to international reinsurance markets,” said Bill Newton, executive director of the Florida Consumer Action Network. “By reducing the supply of reinsurance, homeowners, large and small businesses and public sector organizations in Florida and across the US will pay the price.”
In an economic impact study of previous drafts of bills introduced by Rep. Neal and Sen. Menendez, the Brattle Group, a leading economic consulting firm, found that the proposed tax would reduce the net supply of reinsurance in the United States by 20 percent, forcing American consumers to pay a total of $11 to $13 billion more a year for the same coverage they currently have. In Florida, a state most vulnerable to natural disaster, Brattle estimates that consumers could see their insurance bills increase by more than $817 million. The price of Commercial Multi-Peril Insurance would soar by 12.6 percent to $264 million a year in added costs for Florida businesses, and the price of Homeowners Multi-Peril insurance would go up by 4.2 percent, resulting in $266 million a year in added costs for Florida families.
The Coalition for Competitive Insurance Rates is made up of business organizations, consumer advocacy groups, insurers and their associations.
For more information on CCIR, please visit www.keepinsurancecompetitive.com
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