2014 budget details the "vision" for the FIO

The proposed budget also seeks to disallow a deduction for nontaxed reinsurance premiums paid to foreign affiliates, which has some property casualty insurance interests concerned.

Under the proposal, U.S. insurance companies would be denied a deduction for certain nontaxed reinsurance premiums paid to foreign affiliates under the proposed budget. 

This would be offset by an exclusion for return premiums, ceding commissions, reinsurance recovered, or other amounts received from such affiliates.

"This proposal represents a protectionist and economically destructive tax that would benefit a small group of domestic insurance companies at the expense of U.S. consumers," said R Street Senior Fellow R.J. Lehmann. "Its ultimate effect would be to drive reinsurance capital – so sorely needed in catastrophe-prone states like Florida, Louisiana, Texas and California – out of the country.

"In addition to making reinsurance more costly and limiting access to the global reinsurance industry, which allows catastrophe insurance to function by pooling a wide variety of different kinds of risks from around the world, the proposal is unnecessary," Lehmann added.

The proposal is projected by the Office of Management and Budget (OMB) to raise $2.62 billion over the next five years and $6.21 billion over the next decade, but Lehmann cites analysis that claims the new tax would reduce the net supply of reinsurance in the United States by 20 percent and increase the cost U.S. consumer pay for insurance by $11 billion to $13 billion annually.

"The plan would amount to taxing a company differently based on where its corporate headquarters is located, which violates the basic WTO principle that a member country cannot treat foreign firms differently than domestic firms," Lehmann said. "But even before a WTO grievance would be filed, this proposal would almost certainly result in retaliatory actions by foreign jurisdictions against U.S.-based enterprises abroad, sparking a destructive trade war amid what are already very trying times for the global economy."

FIO did not respond, but the U.S. Treasury office put out a statement in support of the budget.

"The president's budget puts our nation on a fiscally responsible path by shrinking our deficits in a balanced way and making targeted investments to grow our economy that are fully paid for. Treasury is carrying out its mission more efficiently and at a lower cost to the taxpayer, while taking critical steps to strengthen the recovery, restore confidence in the financial system, bolster the housing market and meet our international obligations," said Treasury Secretary Jacob J. Lew.

The NAIC does not have a response to the budget at this time. A response from other groups is pending.