US President Barack Obama proposes ending the reinsurance tax break enjoyed by foreign insurers writing in America that pay reinsurance premiums to their overseas affiliates.

Domestic reinsurers argue the break drives business offshore and gives foreign reinsurers an unfair competitive advantage. 

Foreign insurers say it increases capacity in the US market.

The move features in Mr Obama’s budget proposal for this year, with claims it may deliver taxpayers $US7.57 billion ($9.72 billion) over the next 10 years. The proposal must pass through a hostile Congress.

The Coalition for a Domestic Insurance Industry, representing US insurers, has campaigned for more than 10 years to end the tax breaks.

The Association of Bermuda Insurers and Reinsurers has responded by forming the Coalition for Competitive Insurance Rates. It warns the President’s proposal may increase the cost of insurance and restrict access to flood cover in high-risk areas such as Florida.