Florida Consumer Advocate opposes Neal bill
FLORIDA CONSUMER ADVOCATE EXPRESSES CONCERN TO U.S. CONGRESSMAN RICHARD NEAL OVER PROPOSED LEGISLATION
TALLAHASSEE-Florida’s Insurance Consumer Advocate, Sean Shaw,
sent a letter to Congressman Richard Neal opposing Neal’s bill which imposes a tax on offshore reinsurance companies.
“Today Florida Insurance Consumer Advocate Sean Shaw released a letter to Representative Neal opposing Neal’s bill imposing a tax on offshore reinsurance companies. In so doing, Shaw joins consumer groups Florida Consumer Action Network and Consumer Federation of the Southeast in opposing the bill. In his letter, Shaw says, “(The bill) poses a serious risk of reducing private reinsurance capacity, particularly in states with huge exposure to catastrophic property loss such as Florida. Reducing private reinsurance capacity will increase the need for state government reinsurance protection and thus increase the risk borne by Florida policyholders. “
Shaw goes on to say, “An additional tax will negatively impact the reinsurance capacity available to insurers to cover Florida consumers. Accordingly, the reduction in supply of private reinsurance will increase the need for state government reinsurance protection and thus increase the risk borne by Florida policyholders.”
FCAN and CFSE have said that the tax will raise insurance costs for Florida consumers and the groups are part of a larger Coalition for Competitive Insurance Rates.
A copy of ICA Shaw’s letter is attached below:
Dear Representative Neal:
I am writing to respectfully express my concern about your legislative proposal to impose a new tax on foreign affiliated reinsurance transactions. Although your proposal attempts to level the playing field for domestic and foreign domiciled insurers, it poses a serious risk of reducing private reinsurance capacity, particularly in states with huge exposure to catastrophic property loss such as Florida. Reducing private reinsurance capacity will increase the need for state government reinsurance protection and thus increase the risk borne by Florida policyholders.
Florida consumers, as property and business owners in a catastrophe-prone state, rely heavily on foreign reinsurers to supply capital to insurers providing property insurance coverage. A substantial amount of this reinsurance protection is provided by foreign reinsurance companies because of their ability to absorb risk.
Your proposal to disallow deductions for certain reinsurance premiums ceded to foreign affiliates effectively imposes an additional tax on foreign reinsurance transactions. An additional tax will negatively impact the reinsurance capacity available to insurers to cover Florida consumers. Accordingly, the reduction in supply of private reinsurance will increase the need for state government reinsurance protection and thus increase the risk borne by Florida policyholders. During this time of economic crisis, Florida policyholders should not be bearing additional risk. Consequently, it is imperative to ensure that legislative action does not limit the amount of private reinsurance capacity available to protect Florida consumers against loss.
To the extent the current tax structure is disadvantageous to domestic reinsurers, consideration should be given to reducing the tax burdens on domestic reinsurance companies. As Florida’s Insurance Consumer Advocate, I urge you to reconsider your proposal.
The Insurance Consumer Advocate is appointed by Florida Chief
Financial Officer Alex Sink and is committed to finding solutions
to insurance issues facing Floridians, calling attention to questionable
insurance practices, promoting a viable insurance market responsive
to the needs of Florida’s diverse population and assuring that rates
are fair and justified.
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