WASHINGTON – A proposal in President Barack Obama’s Fiscal Year 2013 Budget Proposal would assess billions of dollars in new taxes on offshore insurers and reinsurers, making it more difficult for U.S. consumers to obtain reasonably priced property and casualty insurance to protect their homes, farms, and businesses.
A provision of the just-released budget would limit tax deductions that domestic insurers can take for some types of reinsurance premiums paid to foreign affiliates. The White House Office of Management and Budget estimates the change would reduce the federal deficit by $111 million in 2013, by $1.04 billion over the next five years, and by $2.45 billion over the next decade.
The following statement from R.J. Lehmann, deputy director of the Center on Finance, Insurance, and Real Estate at The Heartland Institute – a free-market think tank – may be used for attribution. For more comments, refer to the contact information below. To book Lehmann on your program, please contact Tammy Nash at [email protected] and 312/377-4000. After regular business hours, contact Jim Lakely at [email protected] and 312/731-9364.
“Reinsurance is a global market, which is appropriate, because proper risk management requires that risks be spread as broadly as possible. The White House proposal would have the effect of concentrating more risks within the United States, while reducing capacity and increasing costs for consumers who need to insure their property, crops, business, liability, and a host of other risks.
“The plan will not raise the funds the OMB projects, because the end result will be to make the United States a less-attractive place for global insurers and reinsurers to do business. Rather than paying billions in new reinsurance taxes, international insurance companies will transfer their focus to other markets. This is remarkably wrong-headed policy to pursue in the midst of a recession, particularly for states like Florida and California, which rely heavily on international markets to insure against natural disasters.”
The Heartland Institute is a 28-year-old national nonprofit organization with offices in Chicago, Illinois; Washington, DC; Austin, Texas; Tallahassee, Florida; and Columbus, Ohio. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site or call 312/377-4000.