Washington — Rep. Richard Neal (D-Mass.) recently sponsored a bill seeking to alter the way foreign-based reinsurers are taxed.
Specifically, the bill, H.R. 6969, will change the Internal Revenue Code of 1986 to disallow the deduction for excess non-taxed reinsurance premiums with respect to United States risks paid to affiliate insurance companies that are not subject to U.S. tax.
Neal said the legislation will staunch the amount of reinsurance sent to offshore affiliate.
“Since 1996, the amount of reinsurance sent to offshore affiliates has grown dramatically, from a total of $4 billion ceded in 1996 to $34 billion in 2007, including $19 billion alone to Bermuda affiliates,” Neal said in remarks on the House floor. “These insurance profits are shuttled out of the U.S., and then the investment income on those profits is also sheltered from U.S. taxes. It is easy to see why foreign reinsurers, with such a tax benefit, enjoy a significant market advantage.”
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