"The bill does not create a level playing field," Kading said. "It distorts the playing field to create a protected market for U.S. insurers. It denies the ability to offset not only premium as a business deduction but also claim payments as a business decision," he added.

It also makes reinsurance claims paid to the insurer by the foreign reinsurer payable under the contract taxable income, he said.

The legislation (H.R. 3424) proposed by Rep. Neal, a senior member of the House Ways and Means Committee, would disallow the deduction for "excess non-taxed reinsurance premiums" paid by the U.S. units of offshore insurers to offshore reinsurance affiliates.

The bill is being debated by the committee as part of efforts to raise revenues in order to fund legislative priorities of the Obama administration.

Speaking for RIMS, Scott Clark, risk and benefits officer for the Miami-Dade County School Board and a RIMS board liaison, said, "The group has always opposed proposals to restrict market access to insurance capacity."

Scott called the legislation "a great threat to insurance capacity in the United States."

"Over the past decade it has been proposed several times, not surprisingly, by a handful of U.S. insurers which seek to gain via a protected market that would allow them to charge higher prices," Clark said.

"Nothing could be worse for U.S. consumers," he said. "Efforts by U.S. insurers to punish foreign competitors do nothing but harm U.S. consumers, and these proposals should be rejected."

Kading said the $17 billion projected to be raised by the proposed tax over 10 years "is a black-box revenue project" that is "unbelievable." He added, "Many questions exist about how the number was developed."

Kading said that one myth being circulated by the domestic insurers who he says would benefit if the new tax becomes law is that only foreign insurers purchase reinsurance from affiliates.

In fact, he said, "wholly-owned U.S. insurance groups cede about 50 percent of gross premiums to affiliates; non-U.S. insurance groups, on average, cede about the same amount or less."

Lelan Daines, an assistant vice president for risk management and reinsurance at Iasis Healthcare, based in Franklin, Tenn., said her company may be forced to close its hospital in St. Petersburg, Fla., due to difficulty in insuring the property because of both capacity and price issues.

She said that if Rep. Neal's bill becomes law, it would make it even more difficult and expensive to obtain insurance for the facility.