An Organization for Economic Cooperation and Development (OECD) proposal includes a new minimum tax rate of 15% that would apply to companies, including insurers, with revenue above 750 million euros. In its Best’s Commentary, “OECD Announces Agreement Toward Global Minimum Tax,” AM Best states that the application of this new stipulation could be challenging for insurers with longer-duration coverages, as profits may not be realized at the point of sale, unlike other industries. The use of deferred tax balances by insurers allows for timing differences between accounting regimes. The insurance industry has sent comments to the OECD recommending that such deferred taxes be taken into account when determining the effective tax rate. Without such consideration, insurers could see double taxation and would not be treated on par with other industries.
The impact will depend on the final nature of the laws passed by respective governments, exemptions that some protective governments may seek to sustain their competitive advantage and accounting interpretations.
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