A recent article from the Royal Gazette of Bermuda, written by Alex Wright, discusses the offshore reinsurance tax proposed under the Neal bill and the possible effects on the sale of reinsurance in Bermuda, a strong foreign reinsurance market. Wright discusses the efforts of Heartland Vice President Eli Lehrer to educate reinsurers and legislators on the potential negative consequences of the tax changes.
“The nature of the tax threat now is different from what it has been before,” he said. “Fundamental tax reform could make a big difference for Bermuda.
“The bill at this point will not pass except in terms of fundamental tax reform and there is a level of awareness in individual states of this issue that has not existed before.”
Mr Lehrer said that because the bill did not have mass support it had not attracted a significant number of co-sponsors and therefore was unlikely to be passed on its own as well as being opposed by three major legislatures in Florida (both houses) and Louisiana (the House of Representatives).”
The proposed Neal bill would alter the U.S. Internal Revenue Code, capping the deductibility of non-taxed reinsurance premiums paid by insurers to their foreign affiliates. This could have a strong negative effect on insurers in the U.S., making it hard for insurers to manage risk and create higher prices for consumers.
“Adding that the overall bill was still “alive and kicking” and could be put forward at any time, Mr Lehrer said that big strides had been made in alerting the American public and industry to the impact it would have on driving up prices for consumers.
In terms of Bermuda, he said that the last time the Island hit the headlines was over the Uighurs affair and it was being increasingly lumped in with “shady” offshore tax havens, unfairly so in his view.”
While the Neal bill appears to have stalled now, the bill still has supporters in Congress and its reappearance is likely in the next year.
Alex Wright’s Royal Gazette piece, “Tax Threat Looms, but Island in Stronger Position” was originally published May 30 and can be found online at: http://www.royalgazette.com/article/20110530/BUSINESS01/705309945/-1/business01