IN CASE YOU MISSED IT
In a recent op-ed published by the Orlando Sentinel, Carolyn Johnson, Senior Director of Business, Economic Development and Innovation Policy at the Florida Chamber of Commerce, showcases how the “Made in America” tax plan could do further damage to Florida’s property insurance market. Under the Stopping Harmful Inversions and Ending Low-tax Developments (SHIELD) provision, Floridians would face a “hurricane tax” causing property insurance premiums to increase.
Johnson explains, Florida’s property insurance market relies on stable international reinsurance to shift financial risk outside of Florida should a storm touchdown during the hurricane season. She notes, international reinsurers support 59 percent of Floridian insurance companies and more than 75% of traditional reinsurance to Citizens Property Insurance Corporation, Florida’s insurer of “last resort.”
Elaborating on how Floridians could foot the bill for the tax increase, Johnson states “if approved by Congress, this tax increase could mean that insurance companies purchase less protection from reinsurance companies. And if that happens, that means the multiple billions of dollars of insurance claims from multiple hurricanes could be paid solely by Florida insurance consumers, when currently that risk and cost is diversified globally.”
The full opinion piece is linked here and pasted below.
Guest opinion: Tax plan amounts to hurricane tax on property insurers
By: Carolyn Johnson, Senior Director of Business, Economic Development and Innovation Policy at the Florida Chamber of Commerce
JULY 26, 2021
The “Made in America” Tax Plan being discussed in the nation’s capital is bad news for Floridians. The proposal’s intended purpose is to incentivize businesses to reinvest in the United States, but the reality is not as simplistic.
While an initiative to reinvest in the U.S. sounds like a positive move in the right direction, the reality is, Florida’s property insurance market relies on international reinsurers to shift financial risk outside of Florida. If approved, this tax proposal could impose a “hurricane tax” onto Florida property owners by driving insurance rates even higher.
Situated as a peninsula and surrounded on three sides by water, Florida bears the risk of multiple hurricanes each year and so do our residents. Though our state government leaders remain committed to finding solutions to create a healthier property insurance market, Florida’s market already faces challenges like social inflation, such as fraudulent claims and litigation, and higher premiums to reflect the inherent risk of living in a hurricane-prone area.
Unfortunately, this latest tax proposal from Washington, D.C., would be the latest nail in the coffin for Florida’s property insurance market.
Under the Stopping Harmful Inversions and Ending Low-tax Developments (SHIELD) provision, internationally based businesses would face hefty tax burdens through a global minimum tax of 15 to 21%.
According to policy think tank R-Street Institute, a preliminary analysis predicts a global minimum tax of 15% would increase Florida property insurance premiums by $639 million. On the higher end, a 21% tax rate would burden Floridians with an additional $894 million in premium costs.
For the majority of Florida homes and businesses protected by reinsurance, this means increased insurance rates. Over half (59%) of all reinsurers providing coverage in Florida are based outside the United States. Additionally, international reinsurers provided more than 75% of traditional reinsurance to Citizens Property Insurance Corporation, Florida’s insurer of “last resort,” for the 2021 hurricane season.
If approved by Congress, this tax increase could mean that insurance companies purchase less protection from reinsurance companies. And if that happens, that means the multiple billions of dollars of insurance claims from multiple hurricanes could be paid solely by Florida insurance consumers, when currently that risk and cost is diversified globally.
For example, in 2017, Bermuda-based reinsurers paid approximately $30 billion to cover damages from hurricanes Harvey, Irma and Maria. Then in 2018, Bermuda reinsurers covered 23% of Hurricane Michael-related losses. If Florida insurers are unable to diversify risk to the global marketplace, Florida policyholders will be required to cover these losses, causing significant harm to our economy and skyrocketing insurance rates.
The bottom line is Florida depends on a stable reinsurance market and cannot afford the tax hikes proposed in Washington. With 32 of our state’s top 38 insurance providers relying on foreign-backed reinsurance, these D.C. tax proposals would impose a “hurricane tax” on Florida businesses and homeowners by forcing higher costs for property insurance throughout the state.
The Florida Chamber has long believed that competition is key to fostering innovation, growing the economy, and giving businesses the best opportunity to thrive and create more jobs.
Instead of a misguided proposal to increase revenue to our country, our nation’s leaders should focus more on reducing expensive, burdensome and duplicative regulations and decreasing taxation to become more competitive and attractive to businesses like Florida has done for years.
Carolyn Johnson is the Senior Director of Business, Economic Development and Innovation Policy at the Florida Chamber of Commerce.
Stronger Safer Florida is a nonpartisan coalition comprised of businesses, consumer and environmental groups from throughout Florida. This diverse membership seeks to protect consumers before, during, and after catastrophic events impact Florida.
