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

William R. Berkley, chairman of W.R. Berkley Corp., said last week at a press luncheon that 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, said Mr. Berkley, who leads the Coalition for a Domestic Insurance Industry.

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

Opponents of the proposal, including the Risk & Insurance Management Society Inc.—view the tax as punitive and argue any such measure would dramatically constrict capacity and increase rates.

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 domestic and foreign reinsurers, after several recent developments.

According to revenue estimates this month by the Joint Committee on Taxation, the proposal would raise $16.9 billion in 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 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 the proposal would be at odds with U.S. trade agreements.