Abir: protectionism works against consumer
If US tax reform increases the cost of reinsurance, the American consumer will lose out.
That is the view of Bradley Kading, president of the Association of Bermuda Insurers and Reinsurers (Abir), who was speaking after the Bermuda Monetary Authority revealed that Bermuda re/insurers had paid out more than $208 billion in claims to US customers over the past 20 years.
Abir represents about 22 companies with operations in Bermuda. Mr Kading said the market’s capital providers were from Asia, Europe and North America.
“They all put their capital to work in Bermuda to take on the highly infrequent yet severe risks,” Mr Kading said.
“Regulatory or tax protectionism can disrupt this global risk distribution system. And if that happens, that means consumers will likely pay more for insurance and reinsurance.
“The economic analysis says if this system is disrupted reinsurers will have to raise 40 per cent more capital — $70 billion — simply to manage the current global catastrophe risk they take on.
“US insurance buyers and policymakers should work to make sure that doesn’t happen.”
Both the House of Representatives and the US Senate have put forward plans for sweeping tax reform. Each of the bills contains provisions that would levy increased taxes on reinsurance transactions with non-US reinsurers.
The House has already passed its Bill and if the Senate manages to pass its plan — a vote next week is likely — then a committee will be formed to reconcile the two versions.
The BMA’s $208 billion number does not include more than $30 billion in claims related to hurricanes Harvey, Irma and Maria this year.
In September, the BMA revealed that island reinsurers paid $70 billion to EU policyholders and cedants over the past 20 years.
Mr Kading said Bermuda’s reinsurers had reinvented excess liability and catastrophe reinsurance in the 1990s.
“The major beneficiaries of Bermuda’s reinsurance risk transfer expertise are our customers in the US and the EU,” he said.
“Bermuda’s $200 billion, 20-year claims payment contribution has helped to stimulate the US economy, make insurance markets more competitive and boost innovation in the markets.
“The US has unique catastrophe exposures, both natural and man-made, and the US economy needs access to global capital.
“Bermuda has helped to diversify and spread the unique US liability and disaster risk — all for the benefit of the US consumer.”
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