The administration's latest plan would deny any deduction for reinsurance ceded to a foreign affiliate or its parent to the extent that the foreign parent is not subject to U.S. income taxation on the premium. It would also impose other changes in current tax policy to raise revenues from this source.

The administration's plan is among a number of cuts and tax increases sought by President Barack Obama in his proposed $3.7 trillion 2012 budget. The taxing plan prompted support from U.S. insurers who have been promoting such a tax for more than a decade, and strong opposition from foreign-based insurers as well as the Risk and Insurance Management Society (RIMS).

The Coalition for Competitive Insurance Rates, a group of foreign insurers and reinsurers, immediately sent a letter to key members of Congress objecting to the administration's plan.

The letter charged that "this proposal is being advocated as a possible tax revenue offset by a small group of very large U.S. insurance companies. With the enactment of this tax, these companies intend to create a U.S. market share advantage for themselves at the expense of individual and commercial insurance consumers. We oppose these proposals."

W.R. Berkley, chairman and CEO of W.R. Berkley Company, acknowledged that the proposal is "stronger" than that proposed by the administration in its 2011 budget.

He promised further comment later this afternoon.

W.R. Berkley, the Chubb Corporation and the Hartford are the strongest supporters of the tax. They argue that being able to cede U.S. premiums to foreign affiliates that are taxed at a lower rate gives an advantage to foreign insurers.

RIMS reiterated its opposition to the plan. John Phelps, director, business risk solutions, Blue Cross and Blue Shield of Florida Inc. and board liaison RIMS External Affairs Committee, said, "Despite long-standing opposition by policymakers on a bipartisan basis, the Obama administration continues to pursue a policy which is harmful to insurance consumers by capping the deductibility of reinsurance premiums paid by domestic companies to foreign affiliates."

The administration's budget proposal also brings up again the issue of levying the so-called "TARP tax," a levy on financial companies with $50 billion or more in assets who have broker-dealer affiliates. But the administration has lowered the amount it would raise through such a tax to $30 billion from $48 billion over 10 years.

On the positive side for insurers, the budget proposal sustains current support for the Terrorism Risk Insurance programs. That support had been questioned by some administration budget analysts over the past year.