Florida Senate opposes moves to raise US taxes on Bermuda reinsurers
The Florida State Senate has signalled its opposition to US plans to levy more tax from Bermuda reinsurers.
The memorial passed by the legislature in the Sunshine State puts on record its opposition to plans in US President Barack Obama's budget to add to the taxes on non-US reinsurance companies.
The tax revenues estimated in the 2012 budget calls for the collection of $2.6 billion over ten years. This is less than the $2 billion a year than the bill tabled by Representative Richard Neal, but would still result in higher premiums for Floridian insurance buyers, according to the hurricane-prone state's Senate.
SM 484, introduced by Republican state Senator Alan Hays strongly urges the US Congress to oppose the tax provision, based on legislation introduced by Rep. Neal. The budget provision would impose a tariff on the domestic affiliates of foreign-based insurers and reinsurers.
Bermuda-based companies providing reinsurance for their US affiliates would be impacted.
Identical legislation to that introduced by Sen. Hays has been introduced in the Florida State House of Representatives by Rep. Jeff Brandes and is expected to be voted on in the coming weeks.
Other hurricane-prone states have voiced similar concerns. The Louisiana State Legislature passed a resolution opposing the tax proposal last year, and similar legislation has been introduced in Texas.
The Coalition for Competitive Insurance Rates (CCIR), which counts the Association of Bermuda Insurers and Reinsurers (ABIR) among its members, applauded the Florida State Senate yesterday for their stance.
“The Florida State Senate has added their voice to the chorus of opposition who have stated clearly and often that implementing tax polices that raise insurance costs for consumers is a bad idea,” said Bill Newton, executive director of the Florida Consumer Action Network.
“While a small handful of profitable, domestic insurers will see their profits increase if this tax increase is passed, the rest of us will face higher costs to insure our homes and businesses.”
A group of large US domestic insurers have backed the Neal bill and the White House version, saying the tax hike is necessary to “level the playing field” for them to compete with non-US rivals in low-tax jurisdictions.
Nearly two-thirds of all reinsurance required to protect US consumers and businesses is provided by non-US reinsurance companies or their affiliates, according to CCIR.
The Office of Insurance Regulation (OIR) estimates that over 90 percent of Florida's reinsurance comes from overseas companies that have allowed primary insurers in Florida to maintain their current level of coverage.