R Street urges Congress to reject protectionist reinsurance legislation
WASHINGTON (Sept. 29, 2016) – The R Street Institute responded to this week’s introduction by Rep. Richard E. Neal, D-Mass., and Sen. Mark R. Warner, D-Va., of H.R. 6270 and S. 3424, bills that would impose protectionist tax treatment on the common insurance practice of affiliate reinsurance transactions. The following statement can be attributed to R Street Senior Fellow R.J. Lehmann:
Affiliate reinsurance is not a ‘tax loophole’; it an appropriate risk management tool that any sufficiently large insurance group must use. This legislation has been sought for decades by a group of large domestic insurance companies in an attempt to get a leg up on competitors with headquarters located outside the United States. Estimates by esteemed economists show it would shrink the availability of coverage to insure against a range of natural and manmade disasters and cost consumers tens of billions of dollars in higher insurance rates. It also would violate the 20-year-old General Agreement on Trade in Services, sparking both retaliatory taxes and the very real possibility of sanctions from the World Trade Organization. Congress should be very wary of the negative consequences of this dangerous proposal.
