The proposal would disallow tax deductions for direct writing insurance companies in the United States that cede business to offshore affiliates.

The Obama administration supported the legislation through similar provisions in its 2011 budget proposal.

"It's a bad idea," Mr. Noonan said. "This is really an international trade issue. The United States insurance market certainly is not disadvantaged," he said, referring to the coalition's contention that direct writing insurers that take tax deductions on offshore cessions have an unfair competitive advantage. (See NU, June 7, page 7.)"I don't have any dog in the fight," Mr. Noonan proclaimed. "I don't have a U.S. subsidiary. I don't have a quota share in an offshore location."

Earlier this year, at a Bank of America Insurance conference, however, Mr. Noonan, responding to a question about his acquisition appetite, did muse about the possibility–at some future date–of moving into the U.S. market and diversifying Validus' book to include casualty business.

(See related article, http://www.property-casualty.com/Issues/2010/March-8th-2010/Pages/Is-US-Casualty-Next-For-Validus.aspx.)

Currently, Validus writes short-tailed reinsurance from an operation in Bermuda and short-tailed insurance out of a Lloyd's operation known as Talbot, with no U.S. operations.

Speaking at the S&P conference, Mr. Noonan said, "I am still stunned that major U.S. insurance companies suddenly decided that free trade is a bad idea and that they really need government protection."

A few days earlier, Mr. Berkley, speaking at the 2nd Annual Oppenheimer Insurance CEO Summit, also predicted passage of the Neal bill.

"Yes, we will get our tax legislation passed," he said, answering a question that had not even been asked at the start of a Q&A session. "And all those guys who are offshore taking advantage of Americans who pay tax–[those companies] who reinsure their affiliated business offshore will eventually have to pay up," he said.

"It will happen sooner than later," Mr. Berkley said.

Congressional sources told NU, however, that a number of issues surrounding the proposal are generating concern. The issues include the proposal's impact on domestic insurance rates, concerns about how U.S. trading partners view the proposed tax, and the disparity between the revenue projected by government agencies that would be generated by the Neal bill and the similar Obama administration proposal.

Specifically, the Congressional Budget Office and the Joint Tax Committee project that the Neal bill would generate $17 billion in additional revenue over 10 years, while the same agencies project the revenue generated by the similar Obama administration proposal at only $2.3 billion.

At S&P, Mr. Noonan said that "it's just maybe a sign of the times that companies that have been ranting against regulation and taxation for years and years suddenly have concluded that what we really need is a more rigorous tax regime, simply directed at other people."

Fighting a more grassroots battle, foreign reinsurers, through a group called the Coalition for Competitive Insurance Rates, recently released a YouTube video (http://bit.ly/dqItaK) appealing to consumers. The video diagrams and explains the risk-sharing function of reinsurers.

"By spreading the risk around the world, insurance companies don't become overexposed, and [they] can provide consumers with lower prices–all thanks to reinsurers," the voiceover on the video says, also suggesting that the annual cost of the Neal bill to consumers would be $10-to-$12 billion.

Speaking at the "RIMS On the Hill" conference of the Risk and Insurance Management Society in early June, Brad Kading, president and executive director of the Association of Bermuda Insurers and Reinsurers, explained this range of cost figures, saying they are based on likelihood of a 20 percent reduction in the supply of reinsurance to the U.S. market.

At the Washington conference, Mr. Kading said that in addition to increasing costs to consumers, the proposed tax legislation "will distort the playing field" to the advantage of 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 said.

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."

"Over the past decade, [the tax change] 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," Mr. Clark said. "Nothing could be worse for U.S. consumers."