By Bill Newton and Sean Shaw
Special To The Tampa Tribune
July 16, 2010
When major insurance companies fight about federal tax policies, most people figure they don't have a dog in that fight. But when these same companies, whether domestic or foreign, fight for Floridians' business, it's good for consumers struggling to insure their homes and businesses.
That simple point is obscured by William R. Berkley's recent opinion piece, "Don't fall for ploy by greedy foreign insurers" (June 19). When it comes to "greed," Berkley just might know what he's talking about. For a highly paid executive and significant stockholder of a multibillion dollar insurance company, Berkley is mighty stingy with the truth.
He writes that overseas insurers "collectively provide less than 2 percent of homeowners insurance in all coastal states, including Florida." He contends that these companies are mostly American firms that moved offshore "to take advantage of a loophole in the U.S. tax code." And he warns that foreign companies enjoy "a significant advantage over U.S. insurers."
In fact, overseas insurers' affiliates write 14 percent of the home and business property insurance in the Gulf and Atlantic Coast states, and 11 percent of home insurance and 40 percent of business property insurance in Florida. (In contrast, W. R. Berkley has no direct written premiums in Florida for home multi-peril insurance and only $842,000 for commercial multi-peril, less than a tenth of a percent of the total premiums in this state.)
Far from enjoying special tax advantages, foreign companies pay U.S. income tax on their U.S. subsidiaries and foreign income taxes on their foreign operations. If the foreign company is in Bermuda, it's paying a U.S. federal excise tax on gross premiums, not profits. And U.S. firms such as W.R. Berkley lead the market in profit performance.
Berkley is playing fast and loose with the facts because he's promoting congressional legislation that would put a crimp on his competitors: a special tax increase on international insurers proposed by Congressman Richard Neal (D-Mass.)
Berkley's punitive and protectionist tax increase would come out of consumers' pockets. With our history of hurricanes - and in the midst of a serious recession and a disastrous oil spill - Floridians are already having trouble obtaining and affording insurance for their homes and businesses. For a high-risk state such as Florida, especially in hard times, international insurers and reinsurers are indispensable.
If Congress imposes a special tax on overseas insurers and reinsurers, insurance will become scarcer and costlier. According to a study conducted by the respected economic consulting firm the Brattle Group of Boston, the tax increase would reduce the supply of reinsurance throughout the nation by at least 20 percent, and Floridians would pay $500 million more in annual premiums, including an extra $66 million for homeowners.
That is why we're opposing the tax increase. Consumers need more competition, not less.
Bill Newton is executive director of the Florida Consumer Action Network. Sean Shaw is Florida Insurance Consumer Advocate.