Recent U.S. tax reforms have prompted many of the country’s insurers to significantly reduce the portion of premiums ceded to their non-U.S. affiliates, according to Analysis by ISO, a Verisk business, and the Property Casualty Insurers Association of America.
Concerns about possible tax implications under the new law was said to have been a primary driver in this shift in reinsurance utilisation.
The assessment follows news that, after suffering underwriting losses for seven quarters in a row, private U.S. property and casualty (P&C) insurers recorded net underwriting income of $4.2 billion in the first-quarter of 2018.
“The effective dates of these reinsurance changes were close to the January 1, 2018 effective date of the tax reform,” explained Neil Spector, President, ISO, and Robert Gordon, Senior Vice President, Policy, Research and International, PCI.
“As a result, the first-quarter 2018 premium growth is a compound effect of several developments, with the main drivers being organic growth in underlying direct written premiums; multiple insurers ceding less premiums to their non-U.S. affiliates in 2018; and, in some cases, one-time increases in written premiums associated with the returns of previously ceded unearned premium reserves.”
