NEW YORK—A controversial tax proposal targeting offshore reinsurance transactions has a “reasonably good” chance of being considered by Congress before lawmakers depart for the summer recess, says a key proponent of the effort.

William R. Berkley, chairman of W.R. Berkley Corp., said a bill introduced by Rep. Richard E. Neal, D-Mass., and supported by the Obama administration in its 2011 budget proposal, is gaining “additional momentum.”

Recent lobbying efforts have yielded some success in conveying the “competitive disadvantage” domestic insurers face under the current system, he said.

The proposal aims to limit tax deductions for reinsurers that cede a large portion of their U.S. premiums to offshore affiliates.

Mr. Berkley, who leads the Greenwich, Conn.-based Coalition for a Domestic Insurance Industry, made his comments at a press luncheon in New York Wednesday.

Opponents of the proposal—including Swiss Reinsurance Co., the Assn. of Bermuda Insurers & Reinsurers, and the Risk & Insurance Management Society Inc.—view the tax as punitive and argue any such measure would dramatically constrict capacity and increase rates, particularly in catastrophe-prone areas.

Rep. Neal introduced a similar measure in 2008, but Congress did not act on that bill.

While the latest proposal is far from enactment, observers say fierce lobbying efforts are under way by both domestic and foreign reinsurers, following several recent developments.

According to new revenue estimates released earlier this month by the Joint Committee on Taxation, the proposal would raise $16.9 billion over a decade. As a potential revenue-raiser, the bill could be an easy target for a revenue-hungry Congress, observers say.

Meanwhile, a European Union official earlier this month criticized the proposal as discriminatory and a potential violation of international trade agreements.

“The proposal appears to protect the U.S. insurance and reinsurance industry through a discriminatory treatment of foreign insurers and reinsurers,” Angelos Pangratis, acting head of the E.U. delegation to the United States, wrote in a May 10 letter to Treasury Secretary Timothy Geithner.

The letter warns that the proposal would be at odds with U.S. trade agreements, including the World Trade Organization General Agreement on Trade in Services. Under these agreements, members must be treated “no less favorably than U.S. suppliers,” he wrote.

Mr. Berkley said he disagrees with the E.U. letter.

The measure would not violate trade rules because under the proposal, foreign reinsurers would have the option to elect to be taxed as a U.S. company, he said at the luncheon.