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Stock Market and Tax Windfall

Thanks in part to the strong stock market, the property/casualty insurance industry has accumulated an astounding record-breaking surplus totaling $914 billion. Fitch Ratings, “U.S. P/C Insurers Report 2020 Underwriting Profits Despite Costs of COVID-19: Fitch,” Insurance Journal, April 12, 2021.

The 2017 corporate tax cut, which reduced the corporate tax rate to 21 percent from 35 percent, created a profit bonanza for the insurance industry. Consumer Federation of America, “CFA Reiterates Need for Rate Relief for Consumers in Wake of Large Corporate Tax Cut,” February 8, 2018; Lyle Adriano, “Has Donald Trump just given Berkshire a $37 billion boost?Insurance Business America, January 10, 2018.

Congressional Bailouts

Following 9/11, insurance industry representatives showed their patriotism by walking into the White House and demanding a federal bailout. What they received was an unnecessary federal “backstop” that has taxpayers covering most terrorism-related losses after insurers pay a relatively small amount. This law has been reauthorized four times and now protects insurers through 2027. Terrorism Risk Protection Act, 116 Stat. 2322; Center for Justice & Democracy, The Money Vultures (January 2003).

As the nation faced another crisis – this time a pandemic – insurers followed the same playbook. Fearing they might have to pay small businesses for their business interruption losses, they began lobbying Congress for bailout legislation based on the terrorism model. Given how well they’ve been doing fighting businesses in court, however, a new bailout law seems unlikely. “Moody’s Says COVID-19 Impact on P&C Insurance Sector Was ‘Moderate,’” Claims Journal, May 24, 2021 (“Businesses have filed about 1,700 business-interruption claims because of COVID-19 shutdowns, but those cases are largely being decided in favor of insurers, Moody’s said”); Kimberly Adams, “Businesses, insurers want federal backstop to interruption insurance,” Marketplace, September 11, 2020.

Consumer groups

Thanks to the small number of non-profit consumer groups and handful of advocates who have done Herculean work trying to hold the huge, wealthy, and powerful insurance industry accountable throughout the pandemic and beyond. A special shout out to the Consumer Federation of America and the Center for Economic Justice, whose work is cited throughout this report.

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