The Florida insurance and reinsurance market could be set on its heels after the House GOP’s Tax Reform Tax Force proposed a 20% border-adjusted tax, that according to research institute Taxwatch, would raise reinsurance rates by up to 31%.
The proposed border-adjusted tax could devastate the Floridian economy and re/insurance market where 91% of reinsurance comes from international reinsurers – who would be forced to raise rate prices from 14% – 31%, Taxwatch said after conducting a study on the tax’s consequences for the Floridian property insurance market.
With the Floridian property insurance market being largely propped up by foreign reinsurers, the nonprofit research institute said the border-adjusted tax would dominoe down the supply chain, costing commercial and residential property insurance an additional $1.4 – $2.6 billion, annually.
This translates into homeowners paying an extra 7.9% – 12.9% yearly premiums cost increase.
President and Chief Executive Officer (CEO) of Associated Industries of Florida, Tom Feeney, said; “A border-adjusted tax on insurance and reinsurance would be awful for Floridians, decreasing economic activity, employment and earnings.
“That should worry Floridians greatly as well as raise eyebrows across the country. Other coastal states would be wise to examine the potential impact of this proposal on their consumers and businesses.”
Taxwatch echoed industry experts’ warnings that the proposed legislation would ripple out to coastal states and states at risk of severe weather throughout the U.S., meaning homeowners most vulnerable to natural disasters could have difficulty affording insurance costs.
“It’s important for Florida lawmakers to recognize the dire impact that this proposal would have on everyone – not just on businesses, consumers and homeowners.
“As Florida TaxWatch’s study illustrates, decreasing the supply of insurance raises consumer premiums and deductibles. It would effectively be a tax on Florida’s economic foundations – businesses, consumers, families and homeowners. And the effects of this proposal will ripple through Florida’s economy, leaving Florida worse off,” said Feeney.
Taxwatch reports further consequences of the drastic 20% tax border-adjusted hike as reducing Floridian economic activity by $2.8 – $5 billion, slashing worker’s earnings by $1.4 – $2.6 billion, and cutting 42,800 – 77,400 jobs.
If enacted, Taxwatch said the tax hike would; “Inflict long-term damage on Florida’s economy by increasing the cost of living and doing business, resulting in a loss of competitiveness.
“Floridians should be wary of any attempt to constrict the supply of insurance and reinsurance,” said Feeney. “Doing so will increase costs for consumers, homeowners and businesses across the board, and that will lead to an inefficient marketplace. It’s crucial that insurance is affordable for Florida’s businesses and residents.”
A growing group of bi-partisan government representatives and officials, trade associations, consumer groups, and others have spoken out in a public protest against the proposed legislation.
Florida Taxwatch is an independent, nonpartisan, nonprofit taxpayer research institute, acting as a Floridian government watchdog – the study, Analysis of a Border-Adjusted Tax on Florida’s Property Insurance Market, was led by consulting economist Katherine Hayden.
The Floridian property market is not the only re/insurance hub bracing for consequences of proposed tax reforms, reinsurancene.ws recently discussed how potential tax reforms might be felt in Bermuda, and across the globe, reinsurers have been keeping abreast of how to preempt being hit by the protectionist political climate