Proposed reinsurance tax legislation could be disastrous for Florida, says Gov. Scott

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Gov. Rick Scott chimed in on Tuesday to the national debate on legislation that would deny tax deductions for certain reinsurance premiums paid to foreign-based affiliates of domestic insurers. 

H.R. 2054 and S. 991 were introduced by Massachusetts Rep. Richard Neal and New Jersey’s Rep. Bill Pascrell and Sen. Robert Menendez in alignment with a proposal in President Obama’s 2014 budget.

To Gov. Scott and others, these measures could have a “disastrous impact” on homeowners and businesses in Florida, reducing insurance capacity and driving up costs.

International reinsurance companies protect domestic insurers and policy holders. Case in point: about half of the losses from Hurricane Sandy will be covered by international reinsurers, estimated today at more than $9 billion.   Without this global reinsurance capacity, domestic insurers will be on the line for greater risk and this translates directly into heightened premiums for consumers.

“In a state like ours, which is most vulnerable to natural disasters, the Brattle Group estimates that consumers could see their insurance bills increase by more than $817 million as a result of the proposed reinsurance tax,” said Gov. Scott in a letter to Rep. Buchanan. “The price of commercial multi-peril insurance would increase by 12.6 percent or $264 million a year in added costs for Florida businesses, and the price of homeowners’ multi-peril insurance would increase by 4.2 percent, resulting in $266 million a year in added costs for Florida’s families.”

Gov. Scott called on Rep. Vern Buchanan as a member of the House Ways and Means Committee to oppose the president’s budget proposal and similar legislation in Congress that would alter tax deductions for reinsurance premiums.

Scott is joined in his opposition to the measure by the Florida chamber of Commerce, Associated Industries of Florida, Florida Insurance Council, Florida Consumer Action Network, Consumer Federation of the Southeast, Insurance Commissioner Kevin McCarty and Florida’s Democratic leaders, including former CFO Alex Sink.