WASHING TON: The impact of the new U.S. tax law is credit positive for U.S.-based insurance companies, which will boost profitability for many of these firms, particularly those that have been paying high effective tax rates.
Moody’s says that although the new tax law is credit positive for the U.S. property/casualty insurers and reinsurers, there are provisions that are not so favorable to non-U.S. companies.
Moody’s says the base erosion and anti-abuse (BEAT) tax is credit negative for non-U.S. insurers and reinsurers whose U.S. subsidiaries transfer significant premiums to their non-U.S. affiliates. The report adds, however, that companies have some options to mitigate the impact of the BEAT tax such as retaining more business in the U.S., supported by higher U.S. capital levels or having an affiliated non-U.S. domiciled carrier elect to become a U.S. taxpayer. Nevertheless, non-U.S. (re)insurers are likely to incur U.S. corporate tax on a higher portion of their U.S. business, potentially reducing the profitability of Bermuda-based insurers and reinsurers, according to Moody’s.
The Trump tax reform will also make U.S. insurers more competitive with their global counterparts, Moody’s Investors Service says. However, buyers should not expect big price cuts as a result.
