The Risk and Insurance Management Society (RIMS) has voiced its opposition to legislation introduced by Rep. Richard Neal (D-MA) and Senator Robert Menendez (D-NJ) that would place significant restrictions on domestic insurers which cede reinsurance to their foreign affiliates.
According to RIMS, the proposed legislation would disrupt the global insurance marketplace, making commercial insurance less available and affordable to US consumers. The scope of the bill would impact a majority of the industry, but particularly consumers in areas of the country subject to natural disasters as well as terrorism risks.
“The proposed bills are serious threats to small and large businesses, universities, hospitals, and public entities – all of which purchase significant amounts of commercial property and casualty insurance,” said John Phelps, board liaison to RIMS External Affairs Committee and director, business risk solutions, Blue Cross and Blue Shield of Florida, Inc.
“By disallowing the tax deduction for reinsurance premiums ceded by US insurers to offshore affiliates, the legislation will inevitably dismantle a legitimate practice in risk management which facilitates the shifting and pooling of a variety of risks from a domestic insurer to an affiliate reinsurer.”
Phelps added, “During this period of consumer uncertainty and economic fragility, now is not the time for tinkering with this provision of the tax code especially when economists forecast that a change could cost individual and commercial consumers over $10bn a year.”
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