duced in the House of Representatives that would deny the tax deduction for reinsurance premiums paid to foreign affiliates by domestic insurers. Similar to the legislation sponsored by Rep. Richard Neal (D-Mass.), the proposal would have a “chilling effect” on insurers and reinsurers that provide an important safety valve in many areas of the country. The proposal would inhibit domestic companies with foreign affiliates from engaging in a legitimate risk management practice; ceding reinsurance to an affiliate in order to provide for greater capacity and liquidity.
ry means the industry uses to manage its terrorism risk through reinsurance. According to Dowling and Partners, 64% of the losses related to the Sept. 11 terrorist attacks were paid by nonUnited States insurers and reinsurers. RIMS said it would strongly oppose both proposals. ■
the overall inflation rate, and these two sectors are major cost drivers for most personal and some commercial insurance coverages.”
In addition to auto and commercial insurance, P/C insurers provide coverage to homeowners, who all too often seek to lower their insurance coverage as real estate prices fall.
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According to Clark, an economic study of the legislation estimates that if the proposal was enacted into law, it would cost consumers $10-12 billion a year. “This far exceeds the revenue estimate of $233 million savings the Administration is projecting over five years at a far greater cost to individual policy holders and businesses of all types and sizes,” said Clark.
The overall CPI is based primarily on the prices of food, clothing, housing, energy and transportation, as well as other goods and services people purchase for day-to-day living, according to the Bureau of Labor Statistics. Charges for doctors’ and dentists’ services are calculated as part of the overall CPI index but do not carry the weight of food, clothing, housing, energy and transportation prices. The CPI is also commonly considered as the benchmark for the inflation rate.
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“Although construction material costs in 2009 were generally flat, they didn’t drop as home prices did, and it would be short-sighted for a homeowner to lower his or her policy coverage limits,” Weisbart stated. “The key criterion when insuring a home is assessing its reconstruction cost, in the event of a total loss, not what the house would sell for if it were put on the market today.”
Noting the two proposals in the budget, Clark stated that there is an inherent conflict in policy goals. On the one hand, the Administration is curtailing the government’s commitment to ensure a stable market for terrorism insurance. On the other, it is acting to restrict one of the prima-
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“Our roadways and workplaces are
safer today than they’ve ever been,”
Weisbart said. “But just because
claim frequency is down doesn’t mean
these claims cost insurers less money.
The 2009 CPI data show that health-
care and legal costs ran well ahead of
he was due to testify, the Committee
seemed convinced that mandating in-
surance coverage was not the way to go.
“I don’t expect that we’re going to see more on this particular bill,” Hollar told The Standard. “The Committee seemed to be reasonably satisfied that mold is often covered.” Jamie Feehan, an attorney speaking on behalf of the Property Casualty Insurers Association of America (PCI) and State Farm Insurance, agreed.
“It quickly became a tenants’ rights versus landlord case,” he said.
Had the Committee needed additional evidence that the bill would be a bad move from the insurance perspective, Feehan said he would have explained that it could have damaged Vermont’s healthy, competitive property insurance market.
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A bill requiring such broad coverage for mold could have caused insurers to reconsider whether they wanted to do business in the Green Mountain State, Feehan said.
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