Bermuda gets US tax reprieve - for now
Bermuda was dealt a reprieve last week as US President Barack Obama left out of his $210bn tax revenue package proposals that would curb the ability of non-US insurers to cut tax bills by ceding US premiums to affiliated offshore reinsurers.
Unveiling the plan to raise $210bn in extra taxes - including from a clamp down on offshore tax havens - Obama made no mention of the proposals put forward by his Democrat colleague Congressman Richard Neal, that many on the island feared may diminish its appeal as the offshore location of choice for (re)insurers.
Nevertheless, the reprieve may be short lived, with a US Treasury official telling The Wall Street Journal that Obama is yet to take a position on the reinsurance issue, and that proposals are still under review.
Association of Bermuda Insurers and Reinsurers (ABIR) president Brad Kading, who has been leading Bermuda's defence against the proposals with fierce lobbying in Washington, commented: "It's a long fight. We've just passed one more milestone in the road. The US government is hungrily seeking revenue from all sources."
ABIR co-sponsored a report by analysts the Brattle Group which claimed the Neal proposals - if brought into law - would increase US consumers' insurance premiums by an aggregate of $12bn a year.
Kading said he believes the Obama administration now recognises "that the proposed discriminatory reinsurance tax is a complex issue and needs more study".
He said US policymakers had asked for more time to study the Brattle report, which was released earlier this month.
He added that as well as international (re)insurers opposing the proposals, opposition has also come from regulators, state legislators, foreign governments, free market groups and US ceding insurers.
"Policymakers are concerned about bills that create the potential for a trade war and that unnecessarily increase consumer insurance costs," he said.
As previously reported, the Bermuda tax debate has seen ABIR face off with the Coalition for a Domestic Insurance Industry - a group of pro-US domicile lobbyists that counts Travelers, Hartford, Berkshire Hathaway and Chubb among its number.
The group was founded by the outspoken chairman and CEO of US specialty (re)insurer WR Berkley, Bill Berkley, who acts as its spokesman.