Commercial and property insurance costs in Florida will go through the roof, rising at the rate of $1.4 billion to $2.6 billion a year if the Republican Border-Adjustment Tax passes ‘as is’, according to a Florida TaxWatch study.
The tax is intended to benefit local businesses and punish foreign-owned companies by putting levies on the latter’s products.
However, a whopping 91% of reinsurers covering the vital property coverage market come from outside the US and when their costs go up, everyone else’s could too.
Floridians are particularly reliant on their property insurance because almost the entire state is at considerable risk of flooding.
The Associated Industries of Florida, a group which calls itself “The Voice of Florida Business”, argued that though it supports some form of the Border-Adjustment Tax, insurance should be excluded.
Tom Feeney, the president and CEO of Associated Industries of Florida, argued the tax creates winners and losers but charging tariffs on incoming capital doesn’t make sense.
“In theory we want as much capital as possible because it stimulates the economy, creates jobs. Particularly, where it relates to catastrophic insurance in Florida, we can’t concentrate the risk of a $50 or $60 billion storm because we couldn’t afford to swallow a $60 billion event for the same reason most homeowners buy fire insurance: they can’t afford it if their whole house burns down,” Feeney said.
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“They can’t accommodate for that risk and you want to spread that risk around the globe.”
Florida TaxWatch’s Analysis of a Border-Adjusted Tax on Florida’s Property Insurance Market said businesses and homeowners’ premiums would go up as much as $910 a year - or between a 7.9% and 12.9% annual increase.
“Whenever you take out a homeowners’ insurance policy with a company, that company… takes as much as half of your premiums and they buy reinsurance,” Feeney said.
“They know what the actuarial likelihood of your house burning down is, but they have no idea if 90% of the homes in that area are going to lose their roof and have other damages all at once.”
Feeney said even House Republicans who support the Border-Adjustment Tax admit it will drive up costs.
The proposed tax has many opponents well-beyond the insurance sphere, too: the Center for Automotive Research said the GOP tariff would raise the price tag of a vehicle in the US by an average of $2,000.
Yet another study, this one from The Brattle Group, said the total economic loss from the Border-Adjustment Tax would range from $15.6 billion to $69.3 billion, while driving the cost of goods up anywhere from $8.4 billion to $37.4 billion.
