Florida Senate Member Says Reinsurance Bill Would Impose Tax, Cost Increase

On behalf of the citizens of Florida, I am writing to express my concerns about the reinsurance tax proposals that have been made in Congress and by the Administration. Specifically, the Administration's FY 2011 budget contains a proposal that would impose a significant tax on reinsurance that a U.S. insurance firm buys from a foreign affiliate. The Administration's proposal is similar to H.R. 3424, which was introduced in the House of Representatives last July, and the Staff Discussion Draft that was circulated by the Senate Finance Committee in 2008. These proposals would increase taxes, and hence costs, on foreign-based reinsurers, increasing costs and decreasing access for Florida's families and businesses at the worst possible time.

Hurricanes are a fact of life in Florida. The damage and disruption these natural disasters can cause is significant. As a result, families and businesses rely on insurance for financial protection. Private international reinsurance, in turn, is a critical element of the system. In fact, in Florida, international reinsurers provide 93% of the private residential reinsurance. Following Hurricanes Katrina, Rita, and Wilma in 2005, Bermudian-based reinsurers paid $17 billion in claims payments to U.S. consumers, including those in Florida.

The proposals would increase taxes and costs in a way that would disproportionately impact Florida. It is estimated that one of the proposals could increase prices up to 1.9% nationwide; however, in Florida, rates for some lines of insurance could increase by as much as 16.1%. Proposals would likely decrease global reinsurance -- and, as a result, insurance -- capacity, also in a disproportionate manner. In the case of Florida, where expected returns fall as rates increase, reinsurers and insurers may decrease capacity as they move their business to other product lines.

In light of these significant concerns, I strongly urge you to oppose these measures, including the reinsurance tax proposal contained in the FY 2011 budget, H.R. 3424, and similar ideas that may be proposed as revenue offsets. Thank you for your consideration.