Two members of Congress have introduced bills aimed at closing alleged loopholes in the U.S. tax structure that they say favor foreign reinsurers. Representative Richard Neal (D-MA) and Senator Robert Menendez (D-NJ) filed legislation in both the House (H.R. 2054) and the Senate (S. 991) aimed at preventing non-U.S.-based insurers, operating primarily in the U.S., from reducing their U.S. tax bill by using affiliates as reinsurers. As it stands, foreign property and casualty insurers are allowed a deduction for premiums paid for reinsurance if the reinsurer is an affiliate not based in the United States. Said Congressman Neal of the current law, "ending this unintended tax subsidy for foreign insurance companies will stop the capital flight at the expense of American taxpayers and restore competitive balance for domestic companies."
Some opponents of the proposed bills argue that passage of such legislation will do damage to the U.S. property and casualty insurance markets by increasing costs and limiting the ability of reinsurers to diversify and spread risks. "It would tend to concentrate US risks within the United States, rather than allowing the global reinsurance system to spread them throughout the globe," noted RJ Lehmann, a fellow at the R Street Institute, a non-profit policy research organization. Lehmann added that such legislation may be in violation of the General Agreement on Trade in Services, of which the U.S. is a signatory, under which countries agreed not to subject companies to more punitive or burdensome taxation based solely on where the company is based.