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Reinsurer Tax Deductions Targeted by House, Senate Bills

Legislation that would limit tax deductions for reinsurers that cede large portions of their U.S. premiums to offshore affiliates has been introduced in the House...
October 18, 2011

Legislation that would limit tax deductions for reinsurers that cede large portions of their U.S. premiums to offshore affiliates has been introduced in the House of Representatives and the Senate. According to a joint statement issued Wednesday by the sponsors of H.R. 3157 and S. 1693 - Rep. Richard Neal (D-Mass.) and Sen. Robert Menendez (D-N.J.) respectively - the change is necessary to ensure "that foreign-owned companies pay the same tax as American companies on their earnings from doing business here in the United States." They claim that the change will reduce the federal deficit by about $12 billion over a decade.

With non-U.S. reinsurance companies or their affiliates providing close to 67 percent of reinsurance coverage in the United States, observers say the legislation would boost costs, reduce reinsurance capacity, and hit disaster-prone states hard. North Carolina Insurance Commissioner Wayne Goodwin opposes the bill, stating, "On the heels of Hurricane Irene's devastation in my state, anything which has the impact of driving up insurance rates and reducing reinsurance capacity for hurricane-prone states is unacceptable."

Read the rest of the article on legislation to tax reinsurance: Tax Threat to Reinsurers (Business Insurance 10/13/2011)