Life Insurers Want Three Items Included In The Stimulus Package
By Steven Brostoff
Life insurance companies are urging Congress to include three items in the economic stimulus package now being debated on Capitol Hill to assist an industry that has taken a major hit due to the Sept. 11 terrorist attack.
Phil Anderson, senior vice president of federal affairs for the American Council of Life Insurers, Washington, emphasizes that the life insurance industry is in a good position to pay all the claims arising from the tragedy.
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However, he says, the industry has taken a hit and action on the provisions at issue is long overdue.
One provision is repeal of Sections 809 and 815 of the tax code, Anderson says.
Section 809 is the provision that imposes a tax on mutual insurance companies by reference to the earnings of stock companies.
Section 815 involves policyholder surplus accounts held by stock companies that were established under a different life insurance tax regime.
The second desired change is repeal of the current restictions on consolidated returns, Anderson says.
Under current law, 35% of the net operating losses of a non-life affiliate of a life insurance company can be used to offset the income of the life insurer.
However, this treatment does not apply for the first five years after the life insurer and non-life company affiliate. ACLI is seeking repeal of both the 35% rule and the five-year rule.
Repealing the restrictions, Anderson says, would allow property-casualty insurers, which took a major hit from the Sept. 11 disaster, to take advantage of the relative health of life insurance affiliates.
Finally, Anderson says, ACLI is seeking a long-term extension of the current treatment of investment income earned by foreign subsidiaries of U.S. financial services firms under Subpart F of the tax code.
Currently, this income is not subject to U.S. tax until the parent receives it. However, this treatment will expire at the end of the year. If it does, the income will be subject to U.S. tax as soon as it is earned by the subsidiary.
Turning to the issue of a possible federal role in providing reinsurance for losses arising from terrorist acts, Anderson says ACLI is examining the subject closely.
Four separate proposals creating a federal reinsurance pool for terrorism losses have been put on the table by p-c companies.
These companies took a tremendous hit from the Sept. 11 tragedy and have seen the market for terrorism reinsurance disappear virtually overnight.
Two of the proposals on the tablethose of the Reinsurance Association of America, Washington, and the Alliance of American Insurers, Downers Grove, Ill.contemplate including life insurance under any pooling arrangement.