23 May 2013

Insurance Europe: US tax proposals will prove costly for consumers

Insurance Europe strongly opposes bills attempting to introduce a tax on reinsurance ceded by non-US companies to their offshore affiliates, saying the proposals would create unequal treatment for EU insurers that already pay substantial rates of tax.

Long-running attempts in the US to introduce a tax on reinsurance ceded by non-US companies to their offshore affiliates was revived by bills introduced on 21 May in the US House of Representatives by Congressman Richard Neal (HR 2054) and the US Senate by Senator Robert Menendez (S 991). Insurance Europe strongly opposes the bills. The proposals would create unequal treatment for EU insurers that already pay substantial rates of tax. They would also distort competition in the US market and would violate US double-tax treaties.

If adopted, the proposals would likely result in more limited insurance capacity and higher costs for US businesses and consumers. This will in particular affect the cover for natural catastrophes, such as hurricane, earthquake and tornado, where international (re)insurers play an essential role in many US states.

Earlier this year Insurance Europe co-signed a letter to the US Congress from the Coalition for Competitive Insurance Rates to reiterate the industry’s concerns that both bills would increase the tax burden on the US subsidiaries of non-US (re)insurers by limiting the deductions for certain reinsurance premiums.

Press release

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