Survey Says U.S. Can't Compete with Bermuda

Fewer than a quarter of insurance industry professionals polled by BestWeek U.S./Canada believe U.S. insurers and reinsurers can compete with firms based in low-tax domiciles and more than half endorsed tax law changes to address the situation.

In an online survey gauging industry opinion on a topic that in recent months has seen attention on the presidential campaign trail, just 24.2% of respondents said U.S. firms could still compete with domiciles like Bermuda, while 21.5% said though primary insurance was still competitive, the reinsurance market was not, according to an exclusive story in BestWeek U.S./Canada.

“I think that insureds still prefer domestic paper for their policies, making it easier for primary carriers to compete with alien insurers,” said Michael Brown, a commercial property underwriter with Golden Bear Insurance Co. in Stockton, CA. “Reinsurance cessions, on the other hand, are handled behind the scenes, without the insured's knowledge, so alien reinsurers who have a more advantageous tax basis gain clear advantage.”

The remaining 54.4% said the U.S. industry was no longer in a competitive position, with most advocating legal changes dealing with reinsurance cessions to offshore affiliates, which have grown from $4 billion to $34 billion in 2007. Under current law, U.S. affiliates of foreign-domiciled insurance groups pay a 1% excise tax on reinsurance premiums paid from a U.S. member to an offshore affiliate, but 44.7% of respondents said that was insufficient, compared with 32.7% who said it was.

Also, in BestWeek Europe:

The British Insurance Brokers Association is facing a possible split over the desire of some members involved in international wholesale and reinsurance business to form a separate trade organization.

Also, in BestWeek U.S./Canada:

The health care plans of both major presidential candidates contain proposals that, if implemented, might reshape the insurance industry, according to a new A.M. Best special report.

And in both editions of BestWeek:

As of the close of the U.S. market on Thursday, Oct. 23, the AMBG stood at 682.35, a one-week decrease of -4.55%.

Visit www.ambest.com/electionnews for the latest election news, survey results, candidate information and audio. Ongoing election results will be posted on the site Nov. 4.