As appeared in Palm Beach Post.
In Washington, a powerful storm of legislation is brewing that would make it more difficult to obtain and afford the insurance we need to stay protected against natural disasters.
Nearly 25 years ago, Hurricane Andrew changed the face of the insurance marketplace in a dramatic way. Up until that point, neither consumers nor insurance companies understood the catastrophic risk exposure to our state. Insurance companies failed and many large companies retreated or significantly reduced their exposure in Florida. A new Florida domestic homeowners’ market and our own Florida Hurricane Catastrophe Fund were born in the wake of Andrew. But part of the reason that this market survived and continues to prosper has been because of private international reinsurance. In fact, 91 percent of private insurance for Florida homeowner insurers is from international reinsurers. Now, two proposals seek to shrink Florida’s insurance and reinsurance market, leaving our state’s consumers with higher costs for the same coverage.
One proposal, crafted by U.S. Rep. Richard Neal, D-Mass., would deny tax deductions unfairly to domestic insurers for certain reinsurance premiums paid to foreign-based affiliates. The other proposal — the border-adjusted tax featured in the House Ways and Means Committee Chairman Kevin Brady’s, R-Texas, Blueprint for Tax Reform — if applied to international reinsurance would dramatically reduce the supply and increase the price of reinsurance upon which Florida’s economy depends.
Florida TaxWatch, an independent nonprofit research institute, recently released a study that found that a 20 percent border-adjusted tax, if applied to international reinsurance, could directly cost policyholders between $430 and $910 more per year. The tax would increase the cost of commercial and residential property insurance in Florida by $1.4 billion to $2.6 billion annually.
Foreign insurers and reinsurers have a long history supporting our state the wake of hurricanes. Simply put, our current Florida insurance marketplace cannot exist without it. Our system is not perfect, but Floridians cannot afford to lose the stability we have gained through managing our risk with this very important tool … international reinsurance.
ROBIN WESTCOTT, TALLAHASSEE
Editor’s note: Robin Westcott was the director of insurer solvency and acting deputy insurance commissioner for the Florida Office of Insurance Regulation.
