President Obama Puts Foreign Reinsurance Tax Loophole in Cross Hairs

FY 2011 Budget Proposal Provides Impetus for Passage of Neal Bill

WASHINGTON--(BUSINESS WIRE)-- The CEOs of some of the nation’s largest U.S.-based insurance companies urged quick passage of legislation to close a loophole cited in President Obama’s FY 2011 budget proposal that allows foreign- controlled insurance companies operating in the U.S. to avoid paying U.S. income taxes.

“The President’s proposal is a good start,” stated William R. Berkley, Chairman and CEO of W. R. Berkley Corporation. “We now call on Congress to pass the Neal bill and end hurtful tax loopholes that for years have benefited foreign-controlled insurance companies and created a competitive disadvantage for insurance companies based in the United States.”

Representative Richard E. Neal has introduced H.R. 3424, a bill that will eliminate current tax loopholes that permit foreign-controlled insurers to escape U.S. income tax on profits from policies covering U.S. risks. This practice of reinsuring U.S.-written business with a foreign affiliate in a low or no-tax jurisdiction [Related Party (Affiliate) Reinsurance] costs the U.S. Treasury billions of dollars in tax revenues, and gives foreign insurers a significant advantage over U.S. competitors in attracting capital to write U.S. business. A similar bill has been released by the Senate Finance Committee staff.

“The President’s proposal brings much needed attention and momentum to this issue that for years has created an uneven economic playing field,” stated John Degnan, COO of The Chubb Corporation. “In this time of economic crisis, we cannot afford to give foreign-controlled insurers continued tax breaks. They should not be allowed to avoid taxes at a time when others are being asked to contribute to our nation’s economic recovery.”

"It has been obvious for years that a loophole in our tax laws is increasing the burden on American taxpayers and giving foreign insurance companies a huge advantage over American firms,” stated Jay Brown, CEO of MBIA Inc. “The President is right -- we must put a stop to it. We urge Congress to support the Finance Committee and Congressman Neal's efforts to pass effective legislation to close this loophole and prevent foreign companies from avoiding tax on their income from insuring U.S. risks."

Background information and resource material are available at www.coalitionfordomesticinsurance.com. Please contact Karen Horvath (W.R. Berkley) at 203.629.3040 or Andrew Shea (CounterPoint Strategies) at 240.482.0583 to schedule an interview.

W.R. Berkley
Karen Horvath, 203-629-3040
or
CounterPoint Strategies
Andrew Shea, 240-482-0583

Source: Coalition for a Domestic Insurance Industry