The Risk and Insurance Management Society, Inc. (RIMS) has joined the opposition to US legislation disallowing tax deductions for reinsurance premiums paid to foreign affiliates that exceed the industry average for each line of property and casualty insurance business.

The legislation, H.R. 6969, was introduced on Friday by Democratic Rep. Richard E. Neal, a senior member of the U.S. House of Representatives Committee on Ways and Means.

"RIMS opposes any legislation that would result in negative implications for the global reinsurance marketplace and US businesses that rely on this market," says Terry Fleming, member of RIMS board of directors and director of the division of risk management for Montgomery County, Maryland.

"It is RIMS belief that a free and fair marketplace fosters a healthy and competitive climate for reinsurance while at the same time assures more available and affordable property and casualty insurance."

Under the current tax code, the law permits insurers to deduct reinsurance premiums paid to affiliate foreign reinsurers without any limitations.

RIMs said the legislation would place an artificial cap on the deduction, potentially causing market disruptions.

Over the years, non-US reinsurers have served as an important backstop ensuring the availability of insurance, particularly in areas prone to natural disasters. RIMS opposed similar legislation in 2001 and 2007.

The bill is also beign opposed by theAssoociation of Bermuda Insurers and Reinsurers, which has described it as "isolationist".

Neal who has the backing of some US reinsurers, claims that reinsurance cessions to offshore affiliates has grown from $4 billion in 1996 to $34 billion in 2007, with $19 billion of that total going to Bermuda affiliates of reinsurers doing busines in the US.