R Street Institute warns of higher premiums in light of cross-border reinsurance tax
A study on the impact on the New Madrid zone in light of a potential cross-border reinsurance taxation, by R Street Institute, claims that such a tax would increase property & casualty (P&C) premiums in the region by $740 million over the next decade.
A recent paper by R Street Institute’s Lars Powell, Ian Adams and R.J. Lehmann, examines the impact the implementation of a tax on cross-border reinsurance purchases would have on consumers in the New Madrid Seismic zone, and calls for the U.S. government to avoid such a tax.
“It’s important to bear in mind that, under the current system, insurance companies don’t just import reinsurance – they also export risk. Denying insurers the ability to engage in responsible risk transfer would mean concentrating those risks here on our shores,” said the authors of the paper.
The report finds that were a taxation of this nature to come into force, it would limit the ability to spread risk globally.
According to the authors, Arkansas, Missouri and Tennessee stand out as three regions with exposure to seismic risk. Ultimately, the report finds that any cross-border reinsurance taxation would see property and casualty premiums for consumers in the regions increase by $740 million over the next ten years.
“This would have a significant impact on the ability of consumers within the zone to obtain coverage affordably,” finds the report.