NU Online News Service, Dec. 02, 9:22 a.m.EST

WASHINGTON—Republican legislators from Florida and a trade groupfor Bermuda insurers are renewing their concerns about thepotential high cost of raising taxes on offshore insurers as ameans of addressing budget deficit and debt concerns.

In a letter to the leadership of the House Ways and MeansCommittee, nine members of the Florida congressional delegationasked the tax-writing panel to oppose the establishment of apunitive tax on reinsurance.

Brad Kading, president of the Association of Bermuda Insurersand Reinsurers, made the same point recently in an appearance inAtlanta.

 "We are suffering through a global debt crisis; thewisest public policy is to maximize private-sector risk-bearing,"Kading remarked to a real estate market and property insuranceconference hosted by the Atlanta Federal ReserveBank. 

The Florida legislators and Kading made their comments out ofconcern that provisions raising taxes on foreign insurers would beon the minds of legislators as they seek to offset tax cuts anddeficit-reduction proposals now working their way throughCongress.

For example, Congress is now working on legislation that wouldextend bills to bar implementation of the alternative minimum tax,according to industry officials.

The break expires Dec. 31. Democrats are also pushinglegislation that would extend the ban. But the party appears to bemaking an exception for renewing and extending a tax break onpayroll taxes that is also set to expire at the end of thisyear.

The Florida legislators said the bill, H.R. 3157, introduced byRep. Richard Neal, D-Mass., would "lead to higher premium costs forcitizens of Florida and the rest of the nation."

The legislation is aimed at closing an alleged loophole thatallows foreign-based insurers with U.S. subsidiaries to cedepremiums on their U.S. risk to their offshore units, therebyreducing their taxes.

The Obama administration has also proposed legislation aimed atclosing the loophole, but the revenue gained from the Obamaadministration proposal would be far less than the Neal bill.

The Neal bill would impose a tariff on international reinsurancefirms, reversing current policies that allow insurance companiesbased in the United States to claim a deduction on their corporatetax return for the amount of reinsurance premiums paid to a foreignaffiliate.

Signing the letter were Reps. Dennis Ross, David Rivera, BillPosey, Sandy Adams, Jeff Miller, Mario Diaz-Balart, Gus Bilirakis,Ander Crenshaw and Illeana Ros-Lehtinen.

The letter was written to Reps. Dave Camp, R-Mich., and SanderLevin, D-Mich., the chairman and ranking minority member of theHouse Ways and Means Committee. The Republican members of theFlorida delegation said that the Neal bill's "punitive andanti-competitive taxes" would result in "a less secure propertyinsurance market."

The letter also said that "this proposal will, in the long term,do nothing to foster economic growth or make the United States anattractive place to do business."

In his comments, Kading said that despite more than $80 billionin global property catastrophe losses for 2011, the commitment ofreinsurance markets to the U.S. remains stronger than ever, withample capacity to meet the demands of U.S. insurers. 

Kading also said that U.S. consumers benefit from the growth innon-U.S. catastrophe risk.

He said that because of this, "in 1992, the largest per eventcover a U.S. insurer could buy from a reinsurer was $400million."

He said this has now grown to $3.5 billion in 2011. "Bermuda'sreinsurers provided nearly half of that capacity in 2011," Kadingsaid, citing statistics from a reinsurance broker.