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March 23, 2023

CT lawmakers propose 5% surcharge on insurers that underwrite fossil fuel companies

Andrew Larson | Hartford Business Journal The State Capitol.

Note: As of April 11, the proposed bill had died, as it was never taken up for a vote and the committee’s business ended in March. 

State legislators have proposed a bill that would impose a surcharge on insurance companies that underwrite policies for businesses “involved in the exploration and production of” fossil fuels.

The bill, introduced by the Insurance and Real Estate Committee, would apply a 5% annual tax on premiums received by insurers licensed in Connecticut from companies that produce fossil fuels, such as coal, oil, natural gas, propane or any other petroleum product.

Renewable energy companies are specifically exempted.

Tax revenue from the surcharge would be split between the state Department of Energy and Environmental Protection’s Climate Resilience Fund and the Connecticut Insurance Premium Assistance Program.

During a public hearing held March 2, the bill received support from environmental advocates, including the Sierra Club and Connecticut Citizens Action Group. The insurance industry strongly opposed it.

Eric George, president of the Insurance Association of Connecticut, said the bill inappropriately singles out the insurance industry and “seeks to use the industry as a cudgel against fossil fuel companies.” 

“The bill also fails to recognize that the insurance industry is a leader in the climate change arena,” George said in his testimony.

Kristina Baldwin, vice president of government affairs for the American Property Casualty Insurance Association, said the bill would likely be unconstitutional because it imposes the surcharge on any insurer licensed in Connecticut, even if the insurer and/or risk is located outside of the state.

“This likely violates the Due Process Clause of the U.S. Constitution,” Baldwin stated. “Premium taxes/surcharges for admitted insurers are generally only imposed on risks written within the state.”

The insurance industry also raised concerns about the proposed legislation increasing insurance costs.

The proposed bill, Senate Bill No. 1115, was referred to the Joint Committee on Insurance and Real Estate.

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