WASHINGTON, Sept. 19 Bermuda-Insure-UStax
WASHINGTON, Sept. 19 /PRNewswire/ -- Just introduced U.S. House tax
legislation -- if enacted -- will reduce critical U.S. insurance capacity and
drive up prices for U.S. consumers, as previously noted by the Coalition for
Competitive Insurance Rates which wrote in opposition to this concept in
letters to U.S. Senate Finance Committee members last fall. This bill, HR
6969 introduced September 18 by U.S. Rep. Richard Neal, will affect all
foreign insurers that have U.S. subsidiaries and that also provide insurance
and reinsurance coverage to the U.S.
"With the current U.S. financial market turmoil -- including the U.S.
government takeover of the country's largest insurer -- this is a dangerous
proposal that fundamentally limits capital available to U.S. insurance
companies and their consumers, and puts a straightjacket on continued foreign
insurer assistance to the U.S. market," according to Nancy McLernon, President
and CEO of the Organization for International Investment (OFII), an
association of U.S. subsidiaries of companies headquartered abroad. "In
addition, this bill would affect workers employed at American operations of
non U.S.-based insurance companies -- over 100,000 Americans work at these
firms, which support an annual payroll of over $9 billion," McLernon stated
today.
"Without a competitive global reinsurance market, it would be even more
difficult and expensive for South Carolina and other coastal state home and
business owners to obtain insurance to protect them from hurricanes," said
today South Carolina Insurance Director Scott Richardson, in reference to HR
6969. Richardson and several other insurance commissioners had written in
opposition to similar proposals last fall.
"Twice before, U.S. policyholder groups have urged opposition to such
proposals because of their effect on the availability and affordability of
insurance. We say it again now -- these proposals are protectionist measures
aimed at benefiting some competitors in the market at the expense of others.
Ultimately, the U.S. consumers will suffer if this proposal is approved," so
stated the Coalition for Competitive Insurance Rates in its letter to Sen. Max
Baucus, Chair of the Senate Finance Committee, last fall. The signers of that
letter included major U.S. business and consumer organizations including the
Risk and Insurance Management Society, the Florida Consumer Action Network,
the National Risk Retention Association, the Organization for International
Investment, the CEA -the European Insurance and Reinsurance Federation and the
Association of Bermuda Insurers and Reinsurers.
"This bill is an isolationist effort by a handful of very large, very
profitable U.S. insurance corporations who intend to create a new barrier for
their competitors so that they will benefit from a protected market. This
proposal could not come at a worse time for the U.S. economy. Higher prices
for consumers are the likely outcome," said Bradley L. Kading, President of
Association of Bermuda Insurers and Reinsurers (ABIR).
The U.S. insurance market is dependent on domestic and foreign
participants which collectively have enough capital to meet the U.S. insurance
market's aggregate capacity needs. U.S. consumers benefit from this global
market which assures more affordable and available insurance coverage than
otherwise would be the case.
"It would be more difficult for doctors and nurses to obtain liability
insurance. It would be more difficult for farmers to choose among competing
crop insurers. It would be more difficult for local governments to issue bond
financing. It would be more difficult for the U.S. government to find
capital to support troubled U.S. insurance companies. The likely outcome of
this discriminatory tax legislation would be to make it more expensive and
difficult for U.S. consumers to get insurance protection. This is not what
American consumers need when they are also dealing with housing market chaos,
financial instability and record high gas prices," Kading noted. "It would
create a triple economic whammy."
"Hurricane Ike last week has triggered a $1.5 billion reinsurance payout to
the Texas Windstorm Insurance Association, $1 billion of that will be paid by
Bermuda reinsurers -- instead of by Texas taxpayers," Kading noted. "Bermuda
and European reinsurers write the overwhelming majority of reinsurance that
protects U.S. consumers from hurricanes and earthquakes."
"Bermuda's reinsurers were the largest non U.S. payers of claims from
hurricanes Katrina, Rita and Wilma. We paid about 30% of the total claims
costs from those three terrible storms. Our payments were enough to rebuild
45,000 homes in Louisiana and 24,000 homes in Mississippi, damaged by
Hurricane Katrina. In the last seven years, Bermuda's insurers and reinsurers
have paid more than $25 billion to U.S. consumers from catastrophic loss
claims alone. That amount may reach $30 billion by the end of the U.S.
hurricane season. The proposed legislation will either discourage these
reinsurers from committing capacity to the U.S. market or increase prices for
U.S. consumers," Kading noted.
No tax legislation is needed as U.S. subsidiary corporations are already
subject to the U.S. income tax and the IRS already has significant enforcement
powers to review affiliated reinsurance transactions.
For more information contact:
Bradley L. Kading
President and Executive Director
Association of Bermuda Insurers and Reinsurers
202 783 2434 or 202 783 2435
Bradley.Kading@ABIR.bm
Simon Weber
Manager, Government Affairs
Organization for International Investment (OFII)
202-659-1903
sweber@ofii.org
Source: Association of Bermuda Insurers and Reinsurers; Organization for
International Investment
SOURCE ABIR; OFII
