American businesses and consumers rely on the availability of insurance services provided at competitive rates. The Coalition for Competitive Insurance Rates is made up of business organizations, consumer advocacy groups, insurers and their associations advocating for continued and increased competition within the insurance industry.



Legislation introduced in Congress by US Representative Richard Neal (D-MA) and Senator Mark Warner (D-VA) would drastically raise insurance rates across the country by denying a tax deduction for reinsurance premiums paid to foreign affiliates by domestic insurers. The Neal-Warner legislation, which mirrors measures in past presidential budget proposals, would impose an unnecessary and costly tariff on the companies that help spread insurance risks globally. Spreading risk has been especially beneficial for consumers and businesses in areas subject to hurricanes, earthquakes, crop failures and other forms of disaster. This ability to spread risk is also imperiled by the border-adjusted tax featured in the House GOP Blueprint for Tax Reform, which would unfairly target international insurers and reinsurers.

More than 100 independent experts, state government officials, business owners, and associations have publicly filed opposition letters to these tax proposals. Additionally, numerous economic research firms and public policy think tanks, including the Tax Foundation, the Brattle Group and the John Locke Foundation, have published independent studies pointing out the potential economic consequences of the proposals.




CCIR to Congress: BEAT Will Negate Tax Relief for Consumers and Businesses

WASHINGTON, DC (December 16, 2017) – Today the Coalition for Competitive Insurance Rates (CCIR), the leading voice for continued and increased competition within the insurance industry, expressed disappointment in the House-Senate Conference Agreement for H.R. 1, the “Tax Cuts and Jobs Act” that includes a harmful Base Erosion and Anti-Abuse Tax (“BEAT”) that will unfairly slap US consumers and small businesses with higher insurance premiums – undoing potential tax relief they had hoped to get from this bill.

In response to the inclusion of this provision in H.R. 1, CCIR issued the following statement:    

“The global insurance and reinsurance industry is concerned that Congress would include a provision in the Tax Cuts and Jobs Act that will serve only to “Americanize” risk by decreasing capacity benefits to insurance markets globally, thus increasing US prices. This is truly a blow to consumers and business, particularly those in Florida, Texas, California, South Carolina, Louisiana and other disaster-prone states who rely on this capacity in times of catastrophe. The only winner under the double-taxation what will result from BEAT is a group of highly successful domestic insurance companies who stand to benefit greatly from the market distortion this provision will trigger. CCIR welcomes continued dialogue on this issue.”




Commentary: Florida needs to get serious about reinsurance coverage

By Christian Camara and Ian Adams

As appeared in the Orlando Sentinel

These days, it’s hard to get politicians to agree about anything, and that’s too bad. But unless Florida’s congressional delegation comes to a consensus relating to a provision of the Republican tax reform package that could limit the ability of insurers to spread risk internationally, policyholders in Florida — the state’s economy as a whole — will be set on the path to disaster.

While this may sound complicated, it’s not. Here’s how it all works. Property insurance companies, the ones with the big names and sometimes amusing ads, purchase reinsurance coverage to protect themselves from events causing a rush of claims —typically, natural disasters. Reinsurance coverage, best thought of as “insurance for insurance companies,” covers primary insurers in such circumstances. The cost of reinsurance is passed along to consumers like you and me as part of our property insurance premium. The cost of reinsurance, and our coverage, is largely dictated by the ability to spread risk internationally.

That’s because reinsurers write uncorrelated risks, like hurricanes in Florida, earthquakes in Japan, and blizzards in Europe, which are unlikely to happen at the same time, to allow them to offer competitive rates while limiting their exposure to claims. Current law allows property insurance companies to tax-deduct the premiums they pay for this reinsurance protection, the savings of which are passed on to policyholders.

Unfortunately, the Republican tax package, as currently constructed, would repeal this deduction specifically from affiliated offshore companies by levying an excise tax on these transactions.

If enacted, the policy would hamper the ability of reinsurers to spread their risk — which would increase the cost of reinsurance protection. A study by researchers at the Brattle Group concluded that the elimination of the current deduction from reinsurance premiums would reduce the supply of global reinsurance and cost American consumers an additional $5 billion. Because 90 percent of Florida’s reinsurance coverage comes from these offshore affiliated companies, Floridians would experience an estimated $259 million cost increase, amounting to a $100 average increase per household — and higher in places like Southeast Florida — for the same coverage they have today.

Even worse, these figures do not take into account the insurance rate increases many policyholders are going to experience regardless of what Congress does to financially recover from some of this year’s hurricane losses.

In short, given that reinsurance factors greatly in the calculation of property insurance premiums, Florida consumers would bear the brunt of Congress’ action through higher insurance rates. It is not a stretch to say that, as part of tax reform, Congress is considering a hurricane recovery tax that would substantially nullify the tax benefits otherwise produced by the underlying bill.

The need for tax reform is obvious, but there are ways to do it without undermining our state’s ability to financially protect itself from catastrophes. Florida’s insurance commissioner, state legislators, the Florida Insurance Consumer Advocate, business groups including the Florida Chamber of Commerce, and others have warned against the hurricane recovery tax. It’s past time that Florida’s large and influential congressional delegation do their part to put the brakes on this noxious proposal.

Given Florida’s vulnerability to hurricanes, the availability and affordability of reinsurance protection is critical to the state’s economic health and security.

Christian Camara is a senior fellow at the R Street Institute, a free-market leaning think tank, and Florida native. Ian Adams is R Street’s associate vice president for state affairs.


Egads! - a Hurricane Harvey recovery tax

By Ian Adams

As appeared in The Houston Chronicle.

Hurricane Harvey appears likely to go down as the costliest hurricane in U.S. history. The estimates are wide-ranging - from $70 billion in damages projected by catastrophe modeling firm RMS, to Ball State University's eye-popping tally of $196 billion in direct and indirect losses - but nearly all project the storm will top the records set by Hurricane Katrina in 2005. Still, dire as the situation is, a tax reform proposal under consideration in Congress could make it worse.

One element of the tax reform plan - a tax on payments made by U.S. firms to offshore affiliates - could have serious unintended consequences for the insurance market. According to a study by the Brattle Group, a tax like the one included in the proposal from the House GOP would reduce the net supply of reinsurance by 18 percent. The annual cost of property insurance coverage in Texas would increase by $271 million.

The reason is straightforward. Well-known insurance carriers, the ones that advertise using goofy personalities during football games, do not maintain enough capital to satisfy the rush of claims that often follows a natural disaster. Special firms known as reinsurers sell "insurance for insurance companies" to cover such eventualities. Geographical diversification is the key to keeping their rates low, and political actions that make spreading risk internationally more difficult are likely to lead to higher rates.

Hurricane Harvey's impact - combined with other major 2017 catastrophes such as Hurricane Irma and the California wildfires - will be felt for years to come. Insurance and reinsurance companies' coffers have been depleted by at least $100 billion in claims, which means that the supply of insurance available to cover future events is expected to drop and rates to rise at least modestly. But the cost of next year's coverage - and, indeed, the pace of recovery and the region's capacity for resilience in the future - may prove to be as much a question of congressional action as anything else.

While the principle of expanding the tax base to pay for growth-enhancing tax cuts has merit, policymakers could not have chosen a worse time to target the global reinsurance market, particularly for cities such as Houston that were recently visited by natural disaster.

By taxing the transactions that allow insurers to spread risk outside the United States, the cost of reinsurance is forced up, as risk is concentrated locally. This ultimately will lead to higher rates for home insurance, auto insurance, business insurance and workers' compensation. Hence, a tariff on affiliate insurance transactions really is a tax on hurricane-prone regions like Houston.

The surge of claims from huge natural catastrophes this year has predictably led to increased demand for reinsurance, just as supply, as a result of loss payments, has dropped. Come the first of the year, prices for reinsurance will inevitably increase. The real question is: Will those premium increases also have to reflect the cost of a brand-new hurricane recovery tax?

Increases like that have an impact not only on the policyholders who have to pay more for the same coverage, but also on those who are priced out of coverage by premium increases. In the event of another major storm in any of the areas impacted this year, a drop in the insurance takeup rate is an enormous price to pay for marginal revenue gains. When a disaster hits a large number of uninsured individuals, the government is inclined to bail them out, generally at a very high cost.

Tax reform is long overdue. But rushing to broaden the base with misplaced priorities can create back-end costs that outstrip both the revenue gained and the economic growth created. Republican members of Congress will have to ask themselves: Is now really a good time for what, effectively, would be a hurricane recovery tax?

For coastal cities in Texas focused on recovery, the answer is a resounding no.

Adams is a senior fellow at the R Street Institute, a nonprofit, nonpartisan, public policy research organization.



Brattle Economists Study Impact of Reinsurance Taxes on the U.S. Insurance Market

A new study co-authored by Brattle economists examines the impact that a Border Adjustment Tax (BAT) could have on the U.S. insurance market. The report builds on prior Brattle analyses from a January 2017 report that focused on the Neal/Warner Bill tax proposal. The new study reaffirms the importance of U.S. catastrophe insurance and reinsurance and discusses potential negative outcomes for the U.S. catastrophe insurance industry and its policyholders as a result of the BAT. Additionally, the study find that the BAT would result in a widened protection gap between insured and uninsured losses and that the potential burden would fall on the U.S. government.

Although the BAT has dropped from the political radar, both the House and Senate Tax Reform bills include excise taxes on cross border affiliate transactions. According to the authors, the Excise Tax proposals now being actively debated in Congress would likely have a consumer price impact in between the original Neal/Warner Bill tax proposal ($5 billion) and that of a BAT, which could have been higher than $20 billion.

In a separate article published in Tax Notes, the authors recently described that affiliate reinsurance is critical to providing reinsurance capacity to the U.S, and the need for capital in the insurance sector has been heightened by the spate of natural disasters in the U.S. this year.

The study was authored by Brattle Principals Michael Cragg and Bin Zhou, Senior Associate Jehan deFonseka, and Lawrence Powell of The University of Alabama. It was prepared for the Coalition for Competitive Insurance Rates and funded by the Association of Bermuda Insurers and Reinsurers (ABIR), and can be downloaded using the link below.

The Impact of a Border-Adjustment Tax on the U.S. Insurance Market


CCIR to Congress: Ax the Disaster Recovery Assistance Tax


WASHINGTON, DC (November 2, 2017) – Today the Coalition for Competitive Insurance Rates (CCIR), the leading voice for continued and increased competition within the insurance industry, released the following statement in opposition of a proposal included in the tax plan released today by the House Ways and Means Committee:

“As Texas, Florida and other states as well as Puerto Rico continue efforts to rebuild in the wake of Hurricanes Harvey, Irma and Maria, it is unfathomable that the House Ways and Means Committee – chaired by Texas Republican Kevin Brady – would propose in its tax plan a measure that will shrink competition in the insurance marketplace and increase the cost of insurance coverage for consumers. This proposal runs directly counter to the position taken by the Trump Treasury last Friday, in a report on insurance and global regulation that advocated for global competition in local insurance markets as critical to ‘better risk management and possibly higher economic growth rates, which could be reached through a more open approach to foreign insurers and investment.’

Pushing a Made-in-America requirement for insurance is counterproductive when it comes to disaster risk. When it comes to extreme risk, all insurance companies, US and foreign-based, use reinsurance in order to most efficiently and safely pool catastrophic and other risks and match capital to support those risks. Such pooling diversifies risk into a global portfolio providing substantial price and capacity benefits to insurance markets globally.

Taxing global reinsurers as a means to provide a competitive advantage to US-based insurance companies is a very risky and unnecessary move. Global insurers and reinsurers will likely contribute 60% of total payments from Hurricanes Harvey, Irma, and Maria. And, as with past large natural disasters, it is expected that global reinsurers will pay more than 50% of the US losses from this trio of storms. Under the plan proposed by the House Ways and Means Committee today, consumer prices will jump by $100 per policyholder in some states in order to maintain this same level of coverage – a price tag that could negate the benefit of any individual tax cut for many Americans.

While the goal of advancing meaningful tax reform is to be commended, inclusion of a proposal to tax the global reinsurance market will raise revenue at the expense of American homeowners and businesses who continue to struggle from recent natural disasters. We call on lawmakers to put American consumers first – ax the disaster recovery assistance tax.”