Hurricane Isaac — battering Louisiana but, thankfully, sparing New Orleans’ rebuilt and reinforced levees — caused insured losses estimated between $700 million and $2 billion, according to the catastrophe modeling firm AIR Worldwide.
The hurricane’s havoc included wind and storm damage to residential and commercial property, as well as the costs resulting from business interruptions.
In addition to the threat of hurricanes, another destructive development is imperiling homeowners and businesses.
Rep. Richard Neal, D-Maine, and Sen. Robert Menendez, D-N.J., are working on legislation that would impose new taxes on the very insurance companies that provide the backup coverage — the reinsurance — that’s indispensable for the nation’s residential and commercial properties.
This proposal is included in President Barack Obama’s budget for fiscal 2013.
Whether we face hurricanes on the Gulf Coast, tornados in the Midwest or the threat of terrorism in New York, global reinsurance is essential for American consumers and businesses.
By spreading insurance risk throughout the world, rather than just across our state or nationally, global insurance companies provide nearly two-thirds of all reinsurance in the United States.
In 2005, more than 60 percent of the payments for the terrible trio — Hurricanes Katrina, Rita and Wilma — came from foreign insurers and reinsurers.
Targeting these global insurance companies for punitive taxes would be burdensome for homeowners, businesses and our economy, especially in areas such as the Gulf Coast that are vulnerable to natural disasters.
In an economic impact study of the Neal-Menendez bill, published in 2009, updated in 2010 and reviewed in 2011, the Brattle Group, a leading economic consulting firm based in Boston, found the proposed tax would reduce the net supply of reinsurance in the United States by 20 percent.
As we learn in basic economics, when you reduce supply, you raise the price. The Brattle Group estimates the tax would increase the price of insurance in the United States by 2.1 percent to 2.4 percent and as much as 9 percent in some lines of business.
Nationwide, in order to obtain their current levels of coverage, consumers would pay a total of $11 billion to $13 billion more annually.
In Louisiana, the price of homeowners’ multi-peril insurance would rise by 1.4 percent resulting in $21 million per year in added costs.
The price of commercial multi-peril insurance would increase by 5.5 percent, costing $28 million in additional payments.
In Louisiana and throughout the nation, Americans should ask our senators and representatives to oppose this punitive tax that would fall largely on consumers and businesses.
As we recover from Hurricane Isaac, we need a robust insurance market, open to as many competitors as possible, domestic and international. We certainly don’t need a perfect storm of higher taxes and increased insurance costs.
Louisiana commissioner of insurance