Proposals in FY2011 Federal Budget point to rate hikes and decreased availability of Insurance
US consumer groups are “disappointed” with reinsurance-related plans in the US Government’s budget proposals, saying the plans would ultimately impact policyholders.
The Coalition for Competitive Insurance Rates (CCIR) said the FY 2011 budget proposal would deny a tax deduction for certain reinsurance premiums paid to foreign-based affiliates by domestic insurers.
Bill Newton, executive director of the Florida Consumer Action Network, a member of CCIR, said: “US consumers, whether they know it or not, rely on the international insurance market to protect their homes and businesses. Given today’s financial and economic conditions, now is certainly not the time to make access to insurance more costly.”
“Including this provision in the FY 2011 budget will not significantly reduce the deficit.” said Eli Lehrer, a senior fellow at the Competitive Enterprise Institute. “We must do all that we can to revitalize the nation’s economy; foreign-based reinsurers serve as an irreplaceable safety net for the consumers and businesses that are driving that effort.”
Scott Clark, RIMS secretary and director of RIMS External Affairs Committee, said: “The Administration’s proposal to eliminate $250 million (from terrorism risk financing) is regrettable and disappointing, from the consumer perspective. This decision represents an inherent conflict in policy goals. The proposed budget reduces the government’s commitment to ensure a stable market for terrorism insurance, while restricting one of the primary means the industry uses to manage its terrorism risk through reinsurance.”
Insurance industry experts weighed in on the President’s proposals, stating that this change in tax policy would hurt consumers and small businesses across the board.
Meanwhile, Brad Kading, president of the Association of Bermuda Insurers and Reinsurers, a CCIR member, said: “Targeting this vital part of our insurance infrastructure puts at risk insurance support for families, large and small businesses, and farmers that are key to our nation’s economic recovery,” “Similar proposals have found strong opposition from consumer groups, public officials, trade experts, business leaders and others. As we’ve said all along, affiliated reinsurance helps manage volatile, catastrophic insurance risk, whether it involves natural disasters like hurricanes or manmade ones like terrorist attacks. Unfortunately, this proposal is inconsistent with the principles of sound insurance risk management.”
A statement from the CCIR said: “Proposals contained in the budget target foreign insurers who provide large quantities of insurance and reinsurance coverage to Americans. The US insurance market relies on an international network of reinsurance companies to meet the country’s insurance capital needs. Nearly two-thirds of all reinsurance required to protect US consumers and businesses is provided by non-US reinsurance companies or their affiliates.”
The Coalition for Competitive Insurance Rates is made up of business organisations, consumer advocacy groups, insurers and their associations.