As Congress debates the “Made in America” tax plan, it’s important to consider how the policy effort will affect Florida’s property insurance market and homeowners who rely on a stable reinsurance market. According to Bermuda Monetary Authority’s US Data Claims Survey, since 1997, Bermuda-based reinsurers paid more than $400 billion in damage resulting from large catastrophes, property and casualty losses and life insurance claims around the United States. These findings showcase the importance in diversifying risk outside of the state and maintaining a healthy insurance market.
Under the new tax plan being considered, internationally based businesses, like Bermuda-based reinsurers who’ve paid out billions to cover damages, would face hefty tax increases through a global minimum tax. The new tax would range between 15 and 21 percent. For Florida’s struggling property insurance market this policy would create a “hurricane tax” for homeowners. Data from R-Street Institute indicates the tax plan would increase Florida property insurance premiums by as much as 13.2 percent, or $1.62 billion.
Internationally based reinsurers help to diversify risk outside of Florida, alleviating financial damages as the state rebuilds following a catastrophe or natural disaster. The proposed “hurricane tax” could leave Floridians more vulnerable to covering natural disaster costs when a storm hits.
As Florida grapples with property insurance woes like limited policy coverage, increasing rates and excessive fraud, the new tax policy would be yet another hurdle, further crippling Floridians’ abilities to protect their homes during and after a storm, as well as making it more difficult for the state to recover after a natural disaster.
Lawmakers need to consider how the “Made in America” tax plan will negatively impact residents of the Sunshine State by wrongly punishing reliable insurance partners.
The full press release is linked here and below.
United States Remains Bermuda’s Biggest (Re)insurance
Partner with $400 Billion Paid to Customers since 1997
Bermuda (re)insurers paid out US$209.6 billion to United States (US) policyholders and cedants for large catastrophes, property and casualty losses and life insurance claims during the five-year period from 2016 to 2020. This is according to commercial market claims data collected by the Bermuda Monetary Authority (Authority or BMA) in June 2021. By contrast, the BMA’s 2017 survey1 showed that during the twenty-year period from 1997 to 2016, Bermuda (re)insurers paid out US$208.7 billion to US policyholders and cedants. These two surveys, when taken together, reveal that Bermuda (re)insurers have paid out over US$400 billion to US policyholders and cedants since 1997.
The survey results reflect the growing significance of the Bermuda (re)insurance market’s contribution to the US over these two and a half decades. Moreover, the results display an increasing trend of annual loss payments to US policyholders and cedants, with annual payments rising steadily from US$24.4 billion in 2016 to US$58.8 billion in 2020. The US$209.6 billion in total losses paid is comprised of US$120 billion relating to property and casualty insurance losses and US$89.6 billion attributable to life insurance claims.
Gerald Gakundi, Director, Insurance Supervision, said, “The roughly US$400 billion in US losses paid since 1997 by Bermuda (re)insurers reflects the tremendous growth in the Bermuda (re)insurance market. This growth is spurred, in part, by the ability of Bermuda to attract a deep pool of global talent that drives product innovation and supply of risk capital capacity. Bermuda remains well positioned, and the survey results show that the BMA’s regulatory framework promotes sustainable business models that are resilient and capable of staving off the evolving risks, including the economic impact on US communities posed by climate change and other emerging risks. The ability of US (re)insurers to cede risk to Bermuda enables diversification of risk globally, making the cost of buying insurance—particularly catastrophe, property and casualty insurance—more affordable to customers living in US danger zones and significantly lowering the insurance protection gap. The additional capital and sophisticated risk and asset management from the Bermuda life reinsurance market continues to enable US insurers to meet the promises made to their policyholders.”
This information comes from the BMA’s US Data Claims Survey completed in June. The loss information includes both direct insurance and reinsurance, with 230 commercial (re)insurance companies responding to the survey. “The BMA is grateful to the companies that took part in the survey,” Mr. Gakundi said.
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.