Help

BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

BEAT provisions to hit insurance, reinsurance programs: RIMS

Reprints
BEAT provisions to hit insurance, reinsurance programs: RIMS

The Base Erosion and Anti-Abuse Tax provisions in the recently passed U.S. tax bill will negatively affect risk managers organizations’ insurance and reinsurance programs, according to an analysis by the Risk & Insurance Management Society Inc.

The BEAT provisions, which will levy a 10% tax on transactions with foreign affiliates, is one of the most controversial provisions for RIMS members, according to the analysis conducted by RIMS’ external affairs committee.

The Tax Cuts and Jobs Act amended the Internal Revenue Code of 1986 by providing tax cuts to businesses and individuals while streamlining and/or otherwise addressing provisions of the federal tax system the GOP has long promised to change, according to the analysis.

Prior to the legislation’s passage, U.S. tax law allowed the investment of reinsurance premiums raised overseas without tax ramifications. Under the BEAT provisions, such investments would be taxed in an amount equal to the base erosion minimum tax amount for the taxable year. An applicable taxpayer as defined by the legislation would pay the excess of a certain percentage – 5% in 2018, 10% from 2019 through 2025 and 12.5% thereafter – of modified taxable income for a taxable year over a base erosion minimum tax amount, according to the analysis.

The RIMS’ analysis outlined key concerns about the BEAT provisions, including that investment in overseas-based insurance assets may decrease dramatically and that capacity for catastrophic coverages such as wind, flood and earthquake relies heavily on overseas-based reinsurance, which could have the effect of reducing such capacity or, at minimum, raise premium levels dramatically.

“Reaction from overseas trading partners to this tax is uncertain; many opponents of the provision fear a ‘trade war’ could result,” RIMS also noted in the analysis.

The analysis answers key questions for risk managers, including if there is any uncertainty or ambiguity as to whether the BEAT provisions affect reinsurance premiums.

“No ambiguity whatsoever,” RIMS said.

 

 

 

 

Read Next

  • Risk management salaries rising: RIMS survey

    U.S. risk professionals at all levels saw an average 3.5% base salary increase this year, the Risk & Insurance Management Society Inc. said Tuesday, while Canadian practitioners saw an average 2% increase.