Captive insurance professionals yesterday heard Finance Minister Bob Richards predict a rise in US interest rates in the near term during a panel discussion at the Bermuda Captive Conference. But he was challenged by one panelist when he suggested that controversial proposed US legislation that could impact Bermuda’s insurance industry would gain no traction in the US legislature.
A proposal in President Barack Obama’s FY 2015 budget seeks to deny a tax deduction for reinsurance premiums paid to foreign affiliates by domestic insurers. The proposal closely resembles legislation introduced in Congresses by US Representatives Richard Neal (D-MA) and Bill Pascrell (D-NJ) and Senator Robert Menendez (D-NJ) that would drastically raise insurance rates across the country. The President’s budget proposal and the Neal-Pascrell-Menendez legislation would impose an unnecessary and costly tariff on the companies that help spread insurance risks globally. This ability to spread risk has been especially beneficial for consumers and businesses in areas subject to hurricanes, earthquakes, crop failures and other forms of disaster.
More than 100 independent experts, state government officials, business owners, and associations have publicly filed opposition letters to these tax proposals. Additionally, the Brattle Group, an economic research firm, has published a study pointing out the potential economic consequences of the legislation.