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JOHN ANDRE, group vice president, A.M. Best: Do you think that if the seats will change, like they’re expecting, they will

have much impact one way or the other? KADING: If the Republicans take the house—which is the expectation—

then the issue will still be around next year. Bill Berkley is not giving up— he’s a man with a passion about the issue and he wants to keep pursuing the matter. Congress next year, the Republicans would want to take a look at and overhaul the US corporate tax system. Both Bill Berkley and John Degnan at the Ways and Means Hearing said that an issue that should be addressed is the high US corporate tax rates. Some of the leading Republican thinkers in the house up there in leadership positions next year certainly want to address corporate tax rates, so you would see it come up as part of a base broadening issue next year in Congress, and I would think that it would still be alive and under discussion.

ANDRE: Would the discussion take a different path? KADING: Next year, the focus would not be on it as a revenue raiser, the

focus would be on it as an overhaul of corporate tax policy. It would be a tax policy debate as part of a broader issue.

DAVE MATCHAM, chief executive, International Underwriting Association: Has there been any comment from the President on it? Is he behind the campaign or neutral?

KADING: Aside from the Treasury’s proposal in the budget—which was a

very different proposal than what’s in H.R. 3424—the President’s Treasury Department has said, ‘let’s look at transactions to see if there are abusive transactions, and if there are abusive transactions, let’s target them’, so the President’s proposals create a safe harbour. The Neal Bill by contrast doesn’t create a safe harbour. It says that all these transactions are bad and let’s eliminate them, and they use a base of looking at utilisation of unaffi liated reinsurance in the US market and that ends up with about a 12 percent benchmark threshold for where the penalty would apply and if you’re over that threshold, you’re counted as being over it in two ways. One, your use of unaffi liated reinsurance, and for me, the companies that are large users

24 | INTELLIGENT INSURER | November 2010

of unaffi liated reinsurance exhaust their ceded premium on their use of unaffi liated reinsurance, and therefore, they have effectively denied any use of affi liated reinsurance. There are two very different approaches in those two pieces of legislation. The President’s recent discussions about middle- class tax cuts, and research and development tax credits, these only refer generally to tax issues in his budget with regard mostly to US multinationals, which are referred to as paid-fors for those provisions.

SCOTT SCHENKER, senior managing director, LECG: Why not just increase the excise tax because that’s the ultimate goal as opposed to standard corporate tax rate? It would seem a whole lot easier just to increase a certain small percentage as opposed to creating this rolling industry bubble of what’s appropriate for affi liated versus non-affi liated. What was the thinking around that?

KADING: Well the US insurers have generally opposed an increase in

excise tax because they recognise that it will increase their costs on all reinsurance purchases, and the US government has waived its rights to raise the excise tax under its WTO commitments.

RICHARD SPILLER, partner, Edwards, Angell, Palmer and Dodge Law: Who is principally going to be adversely affected by this legislation? Is it all non-US companies or only those in non-treaty jurisdictions?

KADING: The Neal Bill and the Treasury proposal both apply to any

US subsidiary ceding to an affi liate outside of the US, so it applies to any insurer or reinsurer outside of the US.

SPILLER: How can the US government square it [the Neal Bill] with some of the tax treaties the US has entered into?

[laughs, no answers offered]

Perhaps this is an opportunity for us to drill down into the various stances taken by various interested parties involved in or representing insurers doing business in the US. Dave Matcham, has the IUA expressed opposition to the Neal

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