Obama 2016 Budget Includes Foreign Reinsurance Target, Flood Mapping Boost

Obama 2016 Budget Includes Foreign Reinsurance Target, Flood Mapping Boost

The 2016 submitted today by President Barack Obama again includes a proposal to cut the beneficial tax treatment for offshore reinsurance operations as well as several fiscal incentives to address the increase in “extreme weather” in the U.S.

The budget includes a single line item offering revenue estimates for a proposal to “[disallow] the deduction for excess non-taxed reinsurance premiums paid to affiliates.” According to the budget, cutting the reinsurance deduction would add $7.3 billion to government coffers between 2016 to 2025.

The estimates are part of an addendum to the 2016 budget that describes reserves  “for long-run revenue- neutral business tax reform.” Property and casualty insurers are currently allowed a deduction for premiums paid for reinsurance if the reinsurer is an affiliate not based in the U.S.

The tax proposal is part of a multi-year Democratic effort to rework tax treatment for offshore reinsurance affiliate that was first proposed as separate legislation by Rep. Richard Neal, D-Mass. The concept was then incorporated as part of the Obama administration’s tax reform proposals for the last four budget cycles.

Separately, the 2016 U.S. budget includes several proposals in regards to extreme weather, natural hazards and climate science.

“While it cannot be said with certainty that any individual weather event is caused by climate change, it is clearly increasing the frequency and intensity of extreme weather events, from floods to drought to the most powerful storms,” the budget states. “The costs of climate change add up, and ignoring the problem only makes it worse.”

Several of the extreme weather and natural hazard proposals include:

  • $400 million for National Flood Insurance Program Risk Mapping efforts which is considered an increase of $184 million over current funding levels. “This increase will further support efforts to help communities and businesses understand what areas pose flood risks.”
  • A funding level of 70 percent of the 10-year average for “suppression costs within the discretionary budget cap” According to the budget, a cap adjustment would then be used for only the “most severe fire activity” which the administration argues comprises one percent of the fires, but 30 percent of the costs.


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