American President Barack Obama yesterday put forward a plan in his final national budget proposal that would raise the US tax burden on some Bermuda reinsurers.

It was the seventh year in succession that President Obama included the measure in his budget and it has never yet come close to being passed into law by the US Congress.

The proposal would impose a tax on reinsurance premiums paid to non-US affiliates of a US insurer. It would impact several groups that have insurance companies based in the US and a reinsurer based in Bermuda.

Several such groups, including XL Catlin, Arch Capital Argo Group and Chubb, formerly known as Ace, as well as the Association of Bermuda Insurers and Reinsurers, were among the 31 insurance firms, industry bodies and consumer groups that were signatories to a letter sent yesterday to leading members of the House of Representatives Ways and Means Committee and the US Senate Finance Committee from the Coalition for Competitive Insurance Rates.

Mr Obama’s forecast sees the measure raising $411 million in 2017 and nearly $7.7 billion over the next ten years. It is a very small part of the president’s plan to raise $2.6 trillion over the next decade through tax changes.

However, the administration’s proposal is all but certain of being rejected by the Republican-controlled Congress.

The CCIR letter described Mr Obama’s proposal as “isolationist”, highlighted the importance of foreign reinsurance capital to the US and added that measure’s implementation would result in US consumers paying more for insurance coverage.

“A robust insurance market open to as many competitors as possible is essential to consumers,” the letter states. “Global reinsurers are financially strong and have substantial capacity to support US insurance companies. For example: losses from Hurricane Sandy reached nearly $19 billion; international insurance companies covered close to 50 per cent of the losses.

It adds: “A tax on foreign affiliate reinsurance would only serve to limit US insurance capacity and drive up the cost of insurance, a major threat to homeowners and businesses. The only potential winners are the select few firms that stand to profit from decreased market competition.”

It adds that the tariff would fall foul several US trade agreements and international tax treaties and would also violate World Trade Organisation commitments that require that a country cannot treat a foreign company worse than its own.

“We ask you to weigh the unintended consequences of a tax on foreign reinsurers,” the letter concludes. “These proposals are isolationist measures aimed at benefiting some competitors in the market at the expense of American consumers and business owners.”