The Association of Bermuda Insurers and Reinsurers (ABIR) has teamed up with the Coalition for Competitive Insurance Rates this week to write a letter of opposition to the US Senate Finance Committee's proposal to introduce a new 'isolationist' insurance tax.
According to the ABIR, the bill, which was introduced by US Representative Richard Neal on September 18, 2008, would increase insurance prices for US consumers, affecting all foreign insurers that have US subsidiaries and reduce critical US insurance capacity.
In the letter, Nancy McLernon, President and CEO of the Organization for International Investment (OFII), an association of US subsidiaries of companies headquartered abroad, writes:
"This is a dangerous proposal that fundamentally limits capital available to US insurance companies and their consumers, and puts a straightjacket on continued foreign insurer assistance to the US market."
Bradley L. Kading, President of ABIR goes on to remark:
“This bill is an isolationist effort by a handful of very large, very profitable US 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 US economy. Higher prices for consumers are the likely outcome.
The letter then goes on to explain that the US insurance market is dependent on domestic and foreign participants which collectively have enough capital to meet the US insurance market’s aggregate capacity needs. US 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 US government to find capital to support troubled US insurance companies," Mr Kading continued, further stating:
"The likely outcome of this discriminatory tax legislation would be to make it more expensive and difficult for US 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.
“Bermuda’s reinsurers were the largest non US 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," Kading went on, concluding:
"In the last seven years, Bermuda’s insurers and reinsurers have paid more than USD25bn to US consumers from catastrophic loss claims alone. That amount may reach USD30bn by the end of the US hurricane season. The proposed legislation will either discourage these reinsurers from committing capacity to the US market or increase prices for US consumers,” he concluded.
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