Governor Scott Addresses Reinsurance Tax Issue
Governor Rick Scott expressed his opposition to federal legislation that would deny tax deductions for reinsurance premiums paid to foreign-based reinsurers affiliated with domestic insurers. Governor Scott outlined his concerns in a letter to U.S. Representative Vern Buchanan, Florida’s representative on the House Ways and Means Committee. (letter)
Governor Scott indicates that the proposal will have a “disastrous impact” on Florida businesses and families. He is concerned that the proposal is part of President Obama’s budget proposal and previously has been introduced legislatively. The governor cited a study indicating that the proposal would reduce reinsurance supply by up to 20%, which would increase costs to consumers by $11-13 billion. The governor’s letter indicates that commercial multi-peril policy premiums could go up by 12.6% and homeowners premiums could increase 4.2%.
With Florida being the country’s most catastrophe-exposed state, insurers operating in Florida rely substantially on worldwide reinsurance markets. Decreasing the supply of available reinsurance, or increasing costs associated with making reinsurance available, will directly affect insurers’ costs, in turn raising rates.