Florida Democrat Opposes Neal Bill
This past week saw movement on the American tax proposal targeting offshore reinsurance transactions, as lawmakers on the U.S. House Ways and Means Committee debated the issue this past week, but reports say the panel appears a long way away from voting on the measure. Senators have yet to introduce companion legislation and have not held any hearings on the matter recently.
At the House Ways and Means Committee hearing, executives from The Chubb Corp. and W.R. Berkley Corp. testified that an “unintended loophole” in the tax code allows foreign-based reinsurers to avoid billions of dollars in U.S. tax annually.
The bill, H.R. 3424, which was introduced by Massachusetts Democratic Rep. Richard E. Neal seeks to limit tax deductions for reinsurers that cede large portions of their U.S. premiums to offshore affiliates.
The Neal Bill aims to alter the American tax structure as it relates to re-insurers could have a devastating impact on the primary pillar of Bermuda’s economy.
Rep. Neal is targeting what some have termed the “Bermuda loophole” that he says allows insurers to avoid paying American taxes by basing their companies elsewhere.
Florida Democrat Rep. Kendrick Meek [pictured] was critical of the Neal bill, citing its potential impact on the Gulf Coast, the location of many of the costliest insurance losses in recent decades.
“I do have great concerns about this piece of legislation,” Mr. Meek said. “This bill would bring about a great deal of difficulty as it relates to the cost of insurance.”
In addition, reports say that Rep. Meek told the subcommittee the entire Florida congressional delegation is “solid” in its opposition to this bill as “Florida residents are already on their knees” in trying to cope with insurance premiums.
Dr Ewart Brown described Rep. Meek’s opposition to the Neal Bill as “encouraging” saying:
The remarks attributed to Congressman Meeks are very encouraging. Several months ago I led a delegation to Capital Hill delivering the message that changes to the US tax structure as proposed in Congressman Neal’s Bill would be damaging not only to Bermuda’s economy but on the economic well being of many Americans. We have met with Mr. Meek on numerous occasions and I am glad to see that he has come to the same conclusions that we have regarding the Neal Bill.
The bill is said to have divided the American domestic and foreign insurers, with both sides reported to have invested millions to lobby lawmakers.
“At the end of the day, we are foreign. It’s easy to demagogue us,” said Alex Kaplan, vice president at Swiss Re. “What people fail to acknowledge is you want us here. We employ thousands of Americans. We are here to stay.”
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