Budget plan targets foreign-owned reinsurers

An Obama administration budget proposal that would hike foreign-owned US reinsurers' taxes would dramatically constrict capacity and increase rates, particularly in catastrophe-prone areas, if implemented, many observers say. According to the budget request, reinsurance transactions with affiliates that are not subject to US federal income tax on insurance income can result in substantial US tax advantages over similar transactions with entities that are subject to tax in the US. Observers say the proposal is similar in concept to the Neal bill. Among differences, they say, is that instead of the 50% threshold, under the Neal bill calculations would be based on an industry average.