US green tax would hit British insurers

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ROYAL INSURANCE, General Accident, Commercial Union and the BAT subsidiary Farmers appeared yesterday in a list of US insurers likely to be hardest hit by dollars 8bn of proposed environmental taxes under discussion in Congress.

If the legislation is passed in its present form, the list - compiled by Standard & Poor's, the US credit-rating agency - suggests a cost of about dollars 350m to the four companies from a new tax on insurers, spread over 10 years. Total US environmental insurance liabilities are estimated by S&P at up to dollars 100bn. The agency warned that few of the 40 US insurers on its credit- rating list have yet established adequate reserves against the claims.

Steven Dreyer, an S&P analyst, would not name individual companies nor comment on the position of British-owned insurers. He said S&P would be closely following companies on the list as the timing and size of environmental payments became clearer.

The bulk of claims for environmental damage date back to before 1986, when environmental liability was specifically excluded from US insurance contracts. S&P's list is an attempt to pinpoint companies most likely to bear the brunt of environmental costs in future.

Under proposals approved by the House Ways and Means Committee, there is a further proposal to raise dollars 8.1bn in taxes from domestic and foreign insurers and reinsurers, based on their business levels over the period 1965-1985.

The proposal has yet to go to the Senate and may be changed, but the tax, designed to contribute to clean-up costs, has US Treasury approval.

The money would go to high- priority sites designated by the US environmental protection agency. The aim is to reduce the time and cost that would be spent on litigation.

Mr Dreyer said an indication of the tax burden and the overall costs to insurers could be found in the scale of their 'environmentally vulnerable' insurance over the period up to 1985.