Client News
Tallahassee Democrat: David Hart: Proposal threatens insurance in Florida
Monday, August 12, 2013
n disaster-prone Florida, businesses and homeowners rely on a healthy and stable property insurance market. Having affordable coverage options offered by private-sector insurers who are able to handle our state’s hurricane risk are key components to maintaining such a market.
Earlier this year, Gov. Rick Scott approved Florida Chamber-backed legislation to cope with the unique challenges business owners and homeowners face with regard to Florida’s property insurance market, and specifically Citizens Property Insurance Corp. Unfortunately, at a time when our state leaders are working to better protect all Floridians, some members of Congress have introduced legislation that will result in a more limited U.S. domestic insurance capacity and more expensive insurance coverage for all Americans, particularly in states prone to natural disasters.
H.R. 2054 and S. 991, sponsored by Reps. Richard Neal, D-Mass., Bill Pascrell, D-N.J., and Sen. Bob Menendez, D-N.J., would levy costly tariffs on the global insurance companies that provide nearly two-thirds of all reinsurance throughout the country, including a significant share of the business and home insurance in Florida. As the voice of Florida’s business community, we believe this legislation is bad public policy that will create an anti-competitive structure, driving up premiums and unfairly penalizing Florida business owners.
Just as we have insurance on our homes, businesses and cars, insurance companies have a way to protect themselves through reinsurance. Due to Florida’s heightened risk for natural disasters, the domestic private insurance and reinsurance markets simply don’t have enough capacity to meet the demands for catastrophic coverage, which is why we depend on a global network of foreign and domestic reinsurers to provide backup coverage. By spreading risk worldwide, natural disaster insurance costs are dispersed across the globe. However, a tax on the business transactions between foreign reinsurers and their U.S. subsidiaries, which are already taxed under the U.S. corporate income tax and a federal excise tax, will ultimately reduce the supply of reinsurance and cause insurance premiums to increase.
According to an economic impact study of a similar Neal-Menendez bill sponsored during the 112th Congress, leading economic consulting firm the Brattle Group found the proposed tax would reduce the net supply of reinsurance in the U.S. by 20 percent. This reduction would force Americans consumers to pay $11 billion to $13 billion more per year for insurance coverage.
And, in disaster-prone states such as Florida, consumers could see their insurance bills increase by more than $817 million as a result of the proposed reinsurance tax. Furthermore, the Brattle Group study found the price of Commercial Multi-Peril Insurance would soar by 12.6 percent, to $264 million a year, in added costs for Florida businesses.
Too help secure Florida’s future, the Florida Chamber of Commerce urges Florida’s congressional delegation to stand with Gov. Scott and other business, consumer and environmental organizations in opposition of this legislation. Our elected leaders should avoid implementing any proposal that will result in disproportionate burdens placed on consumers and businesses in states, such as Florida, that are most vulnerable to natural disaster.