Subject: Re: Reinsurers face taxing time on premiums - FT - Regulatory tensions between US and EU
From: "Michael Andrews" <[email-masked]>
To: "Hunter Biden" <[email-masked]>
Cc: <[email-masked]>, "Thad Brown" <[email-masked]>, "Ronnie Mainieri" <[email-masked]>, <[email-masked]>, "Chris Heinz" <[email-masked]>, "Devon Archer" <[email-masked]>, "Eric Schwerin" <[email-masked]>, "Rob Mitchell" <[email-masked]>
Date: Wed, 15 Sep 2010 08:50:57 -0400

From experience in the privacy debate where the EU had strict privacy  
regime and would not permit US firms doing business in EU to simply  
use US privacy standards which the felt were inferior. In this case  
the EU recognition process will likely be as cumbersome. Vide can map  
the elite interaction of key players in EU and their proximal networks  
to gain an insight into what they feel the policy should be.  At the  
same time we could map EU-US interaction on th subject from governent  
officials, business execs, academics and others discussing the  
subject. We can talk about what the customer may want but a  
reinsurance company will want as much certainty as is available to  
understand the tax implication. It could impact crossborder  
acquistions and it might (I do not know the tax issues involved)  
impair profits when a US reinsurer is insuring a EU based company.

At the very least the leadership of reinsurance customer would know  
who the key players are in th debate , where they stand, which ones  
could still be educated and what a lobbying effort might need to  
address. We can go much deeper into this in a conversation. It might  
be useful to discuss.

On Sep 14, 2010, at 5:49 PM, Hunter Biden wrote:

> So do I, but what is the question Vide can answer that we or a  
> client can trade on?  And I mean that in the literal sense.  What  
> input does the technology require to provide RSP Analytics with an  
> answer that money can be made from?
>
> R. Hunter Biden
> 202-333-1880
>
>
> On Sep 14, 2010, at 12:17 PM, "Neil Callahan" <[email-masked] 
> > wrote:
>
>> Agreed, very timely.  I love the Reinsurance segment.
>>
>>
>>
>> ------------------------------------------------------------------------------------------
>>
>> Neil Callahan
>>
>> Rosemont Seneca
>>
>> 401 Greenwich Street, Suite 400 | New York NY 10013 | 212-933-9965  
>> | 212-796-4037
>>
>> 1010 Wisconsin Avenue, Suite 705 | Washington DC 20007 | 202-333-1880
>>
>> 917-945-9516 (mobile)
>>
>> 866-749-8879  (fax)
>>
>>
>>
>> From: Michael Andrews [mailto:[email-masked]]
>> Sent: Tuesday, September 14, 2010 12:05 PM
>> To: Thad Brown; Ronnie Mainieri; [email-masked] Hastings; Chris  
>> Heinz; Hunter Biden; Devon Archer; Eric Schwerin; Neil Callahan;  
>> Rob Mitchell
>> Subject: Reinsurers face taxing time on premiums - FT - Regulatory  
>> tensions between US and EU
>>
>>
>>
>> I know we have discussed the political risk facing reinsurers but  
>> this is one we have not discussed but appears to be significant. -  
>> Michael
>>
>> Reinsurers face taxing time on premiums
>> By Paul J. Davies
>>
>> Published: September 12 2010 22:23 | Last updated: September 12  
>> 2010 22:23
>>
>> The insurance industry is facing political and regulatory tension  
>> between the US and Europe that threatens to make life more  
>> difficult for companies doing business in the US – and more costly  
>> for US consumers.
>>
>> The issues are particularly acute for the reinsurance industry and  
>> are likely to be hotly debated at its annual gathering in Monte  
>> Carlo this week.
>>
>> First is the threat of heavier domestic taxes on reinsurance  
>> premiums paid by US insurers to affiliated foreign reinsurers,  
>> which is aimed at raising up to $16bn of extra revenue while  
>> cutting out perceived tax advantages enjoyed by companies based in  
>> Bermuda, Switzerland or other lower-tax jurisdictions.
>>
>> Second is the issue of how quickly – or even whether – US insurance  
>> regulation can gain recognition by European Union rule makers for  
>> being sufficiently robust once Brussels’ new capital rules come  
>> into force in two years’ time.
>>
>> The issues are not yet directly linked, but each is seen as highly  
>> protectionist by people either inside or outside of the US. If the  
>> taxation change is enacted, the regulatory issue could become a  
>> heated political battleground.
>>
>> “There is a very real possibility that some of the things we’ve  
>> seen here have sown the seeds of future friction between the US and  
>> Europe,” says Howard Mills, a former New York state insurance  
>> regulator and now chief adviser on insurance at Deloitte.
>>
>> In the middle of this, large multinational insurers on both the  
>> life and non-life sides, could face higher costs and less ability  
>> to move capital round the world.
>>
>> The taxation of foreign reinsurance premiums has already led to  
>> protests, including strongly worded letters from the EU, and the  
>> Swiss, German and British governments.
>>
>> Alex Kaplan, a vice-president of US regulatory affairs at Swiss Re,  
>> says the proposal in President Barack Obama’s budget is less  
>> onerous than similar measures in a bill sponsored by Congressman  
>> Richard Neal.
>>
>> The former is estimated to raise $2.3bn over 10 years, while the  
>> latter predicts more than $16bn. “[But] both are an attack on  
>> reinsurance and on the free movement of capital,” he says.
>>
>> Peter Skinner, a member of the European Parliament’s economic  
>> affairs committee, says the tax plans misrepresent reinsurance as  
>> being some kind of off-shore dodgy dealings solely to avoid tax.
>>
>> “I’m hopeful that the US treasury and others will see this as a  
>> restrictive and unnecessary act,” he says.
>>
>> Indeed, a hearing before the House Ways and Means Committee this  
>> summer revealed that many in the US were against the tax, including  
>> Floridian politicians, US tax groups and consumer representatives,  
>> who fear higher insurance premiums for ordinary people would result.
>>
>> But with a huge budget deficit and mid-term elections looming, many  
>> fear the Democrats could try to force something through as part of  
>> a spending bill.
>>
>> Mark Watson, chief executive of Bermuda-based Argo, which has a  
>> large US insurance business, says the reality for US insurers is  
>> that many cannot buy enough reinsurance within the US. “The first  
>> adjustment the industry would make [to higher taxation] is to raise  
>> its prices,” he says.
>>
>> Foreign reinsurers already face costly collateral rules on writing  
>> contracts in the US. This came from the idea that US regulators  
>> could not trust the supervision standards of other jurisdictions.  
>> Ironically it is now one of the obstacles in the way of US  
>> regulations gaining recognition, or equivalency, under the incoming  
>> European standards.
>>
>> European regulators recently recommended to Brussels that both the  
>> Bermudian and Swiss regimes be tested for equivalence ahead of  
>> other jurisdictions, but not the US.
>>
>> Sean McGovern, general counsel at Lloyd’s of London, the insurance  
>> market, says the fear was that the US would be found non- 
>> equivalent, which could have tricky ramifications. Big insurance  
>> groups would likely have to hold extra capital in Europe against  
>> their US businesses because of deficient regulation there.
>>
>> “Everyone knows that there is a particularly steep climb for the US  
>> to demonstrate equivalence because of two main issues,” Mr McGovern  
>> says. “One, the unfair collateral rules and two, the low  
>> development of group supervision.”
>>
>> Group supervision is where one regulator – or a collaborative  
>> college – oversees all the various operations of a large, multi- 
>> national company. This is especially tricky in the US where each  
>> state still has its own insurance regulator.
>>
>> But Mr Mills says state regulators may begin to work together more  
>> now that there are moves to create a Federal Insurance Office. He  
>> says: “I think there is going to be greater efforts by the state  
>> regulators to work from the same page and I think they will do this  
>> out of a sense of political survival.”
>>
>>
>>