Claims by the head of one of America's biggest insurance companies that the Neal bill would not hurt US consumers have been called "inaccurate and misleading" by a coalition of trade experts and insurance industry leaders.

The Coalition for Competitive Insurance Rates (CCIR), whose members include the Association of Bermuda Insurers and Reinsurers, released a statement this week saying that William Berkley, CEO of WR Berkley, and his coalition had wrongly concluded that the bill would close a loophole in the US tax law

It also claimed he was incorrect in his assertion that foreign insurers' US affiliates write only two percent of the insurance market and that most foreign insurers have inverted to a foreign domicile-for tax purposes.

The group, which also consists of consumer advocates and state officials, maintained its stance that the bill, HR 3424, which was introduced by Representative Richard Neal (Democrat, Massachusetts), would unfairly raise taxes on the US affiliates of foreign-owned re/insurers.

"Berkley's coalition inaccurately refers to this bill as closing a loophole, but no such loophole exists; the same US tax law currently applies across the board to all affiliates of insurance companies, foreign or otherwise," the statement read.

"This bill exists purely to drive out competition and increase profits for a handful of powerful and successful insurance companies who provide only a small percentage of catastrophe-exposed property coverage across the country."

A report published by economic research firm The Brattle Group last year revealed that the Neal bill's biggest impact will be on consumers and the CCIR said that despite "unsubstantiated" claims by Berkley and his coalition, Americans can expect to pay an additional $10 to $12 billion per year in higher insurance costs if the Neal bill became law.

"The insurers and reinsurers who are in the crosshairs of the Neal bill provide a significant portion of the insurance coverage in the US," said Dr. David Cummins of the Wharton School of Business, one of the authors of the Brattle Group study.

"This irreplaceable global network of companies helps to protect American consumers and their property. William Berkley and his allies have shown no academic or scholarly research or analysis to support their claims that this bill will not hurt consumers.

"The Neal bill would create an uneven playing field. Many insurers would be forced to unwind global risk spreading mechanisms and as a result US reinsurance capacity would fall by 20 percent. This in turn would cause consumer prices to rise for business insurance and for property insurance exposed to hurricanes and earthquakes.

"Even supporters of Berkley's proposal have warned about unintended consequences from this ill advised proposal. As CEO of a highly profitable domestic insurance company, William Berkley is one of the small number of people who does stand to benefit from this legislation."

The CCIR said in the statement that proponents of the Neal bill had painted a false picture of the current insurance marketplace by claiming that foreign-based groups enjoyed a competitive advantage and incorrectly arguing that the new tax would not affect hurricane exposed property.

The coalition said that, to the contrary, the reinsurance tax would adversely affect coastal residents by increasing the cost of reinsurance generally and it restraining the ability of foreign insurers' US affiliates to write as much property insurance as they do.

"Bill Berkley is just wrong when he says that foreign insurers' US affiliates write only two percent of the market," said Dr. Cummins. "We acknowledge that US insurers collectively write most of the US home insurance market, but that doesn't mean there is not an adverse impact based on the discriminatory reinsurance tax.

"These are important providers of property insurance and reinsurance protection to the great benefit of US consumers. It is illogical to suggest that this market will not be affected by a punitive 25 percent gross receipts tax on subject affiliated reinsurance premiums.

"Putting this number in perspective, property-casualty insurers pay federal income taxes that, over time, equate to about 2.3 percent of premiums. This tax is so punitive and confiscatory that it would reduce the supply of reinsurance in the United States by $19 to $22 billion. This represents 20 percent of all reinsurance and 40 percent of all foreign reinsurance. In addition, because the tax is confiscatory, it would not raise significant new tax revenues."

Further, Dr. Cummins noted that investment analysts and others studying NAIC financial data have concluded that foreign insurers do not on average use affiliated reinsurance to any greater degree than US insurance groups.

"Nearly half of US owned insurers cede at least 40 percent of their premiums to affiliates, and a third of them cede at least 80 percent," he said. "Affiliate reinsurance provides a powerful diversification mechanism to insurers, which is less costly than capital and more certain to be renewed than non-affiliate reinsurance. Eliminating a substantial proportion of affiliate reinsurance in the US market would inevitably increase premiums for consumers and reduce insurance availability.

"It is incorrect to claim that affiliated reinsurance is fueled by tax policy when the clear evidence is that in the aggregate, foreign insurers don't use affiliated reinsurance any more than US insurance groups.

"In fact, Bill Berkley's own insurance group makes extensive use of affiliate reinsurance: 17 of the 22 companies in the Berkley group reinsure most of their business with affiliates. Affiliated reinsurance is a basic risk management tool and it is essential to the global risk spreading of international groups.

"Without this global risk diversification benefit they would have to either raise more capital or charge higher prices for the insurance and reinsurance they provide. It is obvious that affiliated reinsurance enhances capacity of the global insurance groups. That capacity is of great benefit to US consumers.

"If some large, successful US insurance companies have a gripe with the high corporate tax rate they ought to focus attention on that. It is of great danger to US insurance consumers to use the US tax code to penalise foreign insurers or their US affiliates. Policy makers need to think beyond the protectionist rhetoric here and recognise the real risk to the insurance business model stemming from the discriminatory reinsurance tax.

"Despite their efforts to paint themselves as a victim, the highly-profitable companies in Berkley's coalition are part of a thriving, competitive marketplace. It is entirely inappropriate to try to use the federal tax code as a competitive weapon.

"Berkley also incorrectly asserts that most foreign insurers have 'inverted', meaning they began as US corporations and then inverted to a foreign domicile-for tax purposes. This is not true.

"The largest foreign insurers with US subsidiaries are European companies and they have invested in the US producing jobs and writing business for decades, some for more than 100 years. Most of the Bermuda insurers were created as new companies there with a global business model and have underwriting operations around the world.

""The US nearly 15 years ago passed a law that deterred corporate inversions - it's not an issue now and it should not be confused with the Neal reinsurance tax issue. The foreign insurers with US operations are net job creators in the US; they are not exporters of US jobs."

The CCIR said that despite the "misinformation" spread by Berkley and his coalition, opposition to the Neal Bill had increased, and more than 100 independent groups had publicly written letters expressing their concerns about it.