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House Ways and Means Select Revenue Measures
Subcommittee Hearing on Reinsurance

On Wednesday, July 14, 2010, The Subcommittee on Select Revenue Measures held a hearing on the taxation of reinsurance between affiliated entities. Please click on the links below for selected video highlights of the testimony:

Florida Insurance Consumer Advocate Sean Shaw – responding to question by Chairman Neal 
Essence of question by Chairman Neal: Is it correct to say that you relied on a report that was paid for by the opposition group of foreign insurers to prepare your testimony?
Excerpted answer by Mr. Shaw: “Yes, I believe so.” “I’ve seen the first page and it says commissioned for, that’s all I know about the Brattle Report.” “I relied on the report. I’m not an economist. I’m just looking at the data, particularly the costs to the Florida insurance consumers.”

Florida Insurance Consumer Advocate Sean Shaw - responding to question by Congressman Earl Blumenauer 
Essence of question by Congressman Blumenauer: Do the companies that take advantage of this tax provision charge lower rates because they pay less in taxes?
Excerpted answer by Mr. Shaw: “ I do not know that answer.”

Florida Insurance Consumer Advocate Sean Shaw - responding to question by Chairman Neal 
Essence of question by Chairman Neal: If we continue on this path of companies moving offshore to avoid U.S. taxes, how will this impact our ability to support our troops in Iraq and Afghanistan and our ability to fund Social Security and Medicare?
Excerpted answer by Mr. Shaw: “I’m just here to talk about the narrow focus on consumers.”

William R. Berkley – Chairman and CEO of W. R. Berkley Corporation – concluding testimony 
Excerpts from concluding testimony: “This issue has to do with an unfair tax advantage that foreign based companies have where they can reinsure their affiliates and maximize their ability to pay the least possible taxes.” “If we do not act, we will find ourselves without a domestic insurance industry.”

John J. Degnan - Vice Chairman and Chief Operating Officer of The Chubb Corporation – concluding testimony 
Excerpts from concluding testimony: “We have an examination by a respected group of economists that suggests that there is absolutely no impact on homeowners insurance rates or reinsurance capacity in the state of Florida from this bill.” “Finally, a $17 billion tax subsidy for foreign insurers is a heck of an inefficient way to help out homeowners and commercial insurers in the state of Florida.

Video Response: June 23, 2010 — Responding to a recent video by foreign insurers riddled with errors and inaccuracies, the Coalition for a Domestic Insurance Industry (CDII) released a video rebuttal today to ensure Congress and consumers have the facts regarding H.R. 3424. H.R. 3424 is designed to prevent foreign-owned insurers avoiding payment of their fair share of U.S. taxes by shifting profits to tax havens overseas. This legislation will actually benefit taxpaying consumers as it is expected to recapture an estimated $17 billion of revenue for the U.S. Treasury. THE COALITION FOR A DOMESTIC INSURANCE INDUSTRY URGES YOU NOT TO BUY INTO THE OPPONENTS' SCARE TACTICS. Third party reinsurance -- which adds needed capacity for catastrophic coverage -- remains unaffected by the proposed legislation.

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The Coalition for a Domestic Insurance Industry represents 13 major U.S.-based insurance groups with over 150,000 employees in offices located throughout the United States. Collectively, we pay substantial U.S. taxes, invest significantly in the municipal bond market, and offer millions of U.S. individuals and businesses financial protection from unpredictable risks. Legislation is essential to close a current law loophole that permits foreign-controlled insurers to strip their income into tax havens and avoid paying billions of dollars in U.S. taxes. This loophole provides foreign-controlled insurers a significant tax advantage over their domestic competitors in attracting capital to write U.S. business. There is no credible reason why the United States tax system should favor foreign-owned groups over domestic insurers in selling insurance in the United States.

Contrary to opponents’ claims, closing the loophole will not harm insurance capacity, increase prices to consumers, contravene treaties, or interfere with free trade. It would merely prevent foreign-controlled insurers from stripping their U.S. income to tax havens and restore a level competitive playing field.

At a time of burgeoning deficits and possible tax increases on U.S. workers and businesses, it seems unfathomable that we would continue to allow foreign-based insurers to avoid U.S. tax on their U.S.-based business. It is time to close this loophole and prevent further erosion of our tax base.

The Situation:

A loophole in current law allows foreign-controlled insurers to strip their earnings overseas and avoid paying U.S. income tax...

Contact Us:

The Coalition For A
Domestic Insurance Industry

Karen Horvath
Tel: 203.629.3040