Plans to introduce an "isolationist" insurance tax bill would limit critical capacity and drive up prices for American consumers.

That is according to the Association of Bermuda Insurers and Reinsurers (ABIR) and the Coalition for Competitive Insurance Rates, who wrote in opposition to the proposal in letters to the US Senate Finance Committee members last year.

They said that if the bill, which has just been introduced to the House by Republican Richard Neal on Thursday, is enacted it will affect all foreign insurers that have US subsidiaries and provide re/insurance coverage to America.

"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," said Brad Kading, president and executive director of ABIR. "This proposal could not come at a worse time for the US economy. Higher prices for consumers are the likely outcome."

The US insurance market is dependent on domestic and foreign participants which collectively have enough capital to meet the market's aggregate capacity needs, said ABIR and the Organisation for International Investment (OFII).

They believe that 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," continued Mr. Kading. "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.

"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.

"It would create a triple economic whammy."

Mr. Kading cited Hurricane Ike, which triggered a $1.5 billion reinsurance payout to the Texas Windstorm Insurance Association, $1 billion of which will be paid by Bermuda reinsurers instead of by Texas taxpayers and the fact that Bermuda and European reinsurers write the majority of reinsurance that protects US consumers from hurricanes and earthquakes, as reasons why the Island's re/insurance industry is so important to the US.