Press Release - DECEMBER 21, 2017

Best’s Briefing: U.S. Tax Reform a Mixed Bag for Insurers

 David Blades, CPCU
Senior Industry Analyst –
Industry Research & Analytics
+1 908 439 2200, ext. 5422

George Hansen
Senior Industry Research Analyst
+1 908 439 2200, ext. 5469

Bobby Skrabal
Industry Analyst
+1 908 439 2200, ext. 5792
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644


The insurance industry will see overall benefits from the reduced corporate tax rate as a result of The Tax Cuts and Jobs Act, once it is signed into law; however, partially offsetting the benefits are certain revenue enhancements that will impact life and property/casualty (P/C) companies. In particular, a repeal of all net operating loss carrybacks could reduce total adjusted and risk-based capital for life insurers, according to a new A.M. Best briefing.

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 .

A.M. Best is the world’s oldest and most authoritative insurance rating and information source.