Writing at starnewsonline.com, JLF President and CEO Kory Swanson and R Street Institute’s Ian Adams warn North Carolinians that our state would be hit especially hard if the ill-advised proposal for a federal border-adjustment tax (BAT) is adopted. The analysis comes from a new JLF/R Street report on the BAT.
For North Carolinians, the problem with such a proposal is that the state’s property insurance companies rely heavily on reinsurance — insurance for insurance companies — written abroad. Eliminating insurance companies’ ability to write off the expense of international reinsurance would make it more expensive and less available. Both effects would seriously disrupt the state’s insurance market.
Reinsurance is a difficult business that requires an international scale because the risks often are enormous. Reinsurers seek geographical diversity of risks from around the globe to hedge that risk. Earthquakes in Japan and floods in England are bundled together with hurricanes in North Carolina to offset the cost of insuring each.