Tax reform in the United States is influencing the economic benefits previously enjoyed by some captive insurance owners. Two reform items specifically affect captives: the new marginal rate, which was decreased from 35% to 21%, and the change in the benchmark interest rates to be used for discounting loss reserves. In this article, Milliman’s Joel Chansky and Mike Meehan provide analyses demonstrating the effects that these new tax items have on both large and small captive insurers.
How will tax reform in the United States affect captive insurers? A.M. Best recently interviewed Milliman’s Joel Chansky on the topic during the 2018 Captive Insurance Companies Association (CICA) International Conference. He discusses several business implications that captives and other insurers must consider related to tax reform.
The Tax Cuts and Jobs Act was signed into law in December. Tax reform will lead to either changes in projected profitability, changes in product design or pricing, or both. In this analysis, Milliman actuaries measure the impact of the tax code changes on a range of different insurance product types.