The very word tax usually sends shivers up oneÃ¢â‚¬â„¢s spine. But tax is an unavoidable part of our industry and the broader business community, so here goes.
A hearing on Capitol Hill today will address a long-running industry debate over whether reinsurance (insurance for insurers) is being used to shift profits from the United States to low-tax or no-tax jurisdictions, creating a competitive advantage for U.S. subsidiaries of foreign corporations.
TodayÃ¢â‚¬â„¢s hearing before the Select Revenue Measures Subcommittee of the House Ways and Means Committee concerns HR 3424, a bill sponsored by Rep. Richard E. Neal (D-MA).
Essentially the bill would limit the deduction taken by a U.S. property/casualty insurer for non-taxed reinsurance premiums paid to related foreign parties.
As with many issues in our industry this is one that elicits differing viewpoints among the industryÃ¢â‚¬â„¢s many and diverse participants.
Insurance Journal reports that the Neal bill is backed by the Coalition for a Domestic Insurance Industry, headed by William Berkley, chairman of W.R. Berkley Corp. The coalition represents 13 major U.S.-based groups.
On the other side, the Coalition for Competitive Insurance Rates (CCIR) opposes the bill. The Coalition notes that nearly 40 independent experts, state government officials, business owners, and associations have publicly filed opposition letters to the proposed legislation.
An updatedÃ‚ study commissioned by the CCIR and prepared by the Brattle Group suggested that the enactment of HR 3424 would: cost consumers an additional $11 billion to $13 billion per year to maintain their current insurance coverage; significantly weaken competition; and reduce reinsurance capacity in the U.S. by 20 percent.
However, in an interview with National Underwriter online, Mr. Berkley disputed the studyÃ¢â‚¬â„¢s findings and noted that the Neal bill has a Ã¢â‚¬Å“very narrow focusÃ¢â‚¬ that would create a level playing field for both domestic and offshore insurers and reinsurers.
A recent post on reinsurance girlÃ¢â‚¬â„¢s blog is worth checking out for more on this story, as isÃ‚ GC Capital Ideas blogÃ‚ for background infoÃ‚ on the Neal bill here. Also check out I.I.I. information on reinsurance.