Press Release - DECEMBER 21, 2017
Best’s Briefing: U.S. Tax Reform a Mixed Bag for Insurers
FOR IMMEDIATE RELEASE
OLDWICK - DECEMBER 21, 2017
The Best’s Briefing, “First Look – Tax Reform 2017,” highlights the provisions in the new U.S. tax reform legislation, currently awaiting President Donald Trump’s signature, that A.M. Best believes will initially have the greatest impact on insurers. The new law’s repeal of the individual mandate for health insurance promulgated under the Affordable Care Act will be discussed in greater detail in the future.
For life insurers, the repeal of the loss carryback period has the potential to reduce the amount of gross deferred tax assets that can be admitted, thereby reducing capital and surplus. Higher after-tax earnings may offset the surplus declines, but this may take time to emerge. A.M. Best will view companies on a case-by-case basis to determine future surplus expectations as the new law takes effect.
Reserve changes will impact life and P/C companies; however, changes applicable to business in effect as of Dec. 31, 2017 will be spread over the next eight years. While life insurance risk-based capital ratios could be significantly impacted, the required capital in Best’s Capital Adequacy Ratio may not change significantly.
The briefing notes that it still remains to be seen how companies’ capital management, product pricing and risk management will be impacted as management of these companies and investors re-evaluate risk and return measures such as effective cost of debt, cost of capital or return on equity.
To access the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=269221 .
A.M. Best is the world’s oldest and most authoritative insurance rating and information source.