New Vermont Law Allows for Affiliated Reinsurance Companies
May 18, 2018
A new law in Vermont offers an onshore affiliated reinsurance alternative to insurance companies affected by the recent imposition of the Base Erosion Anti-Abuse Tax (BEAT) on reinsurance ceded to offshore affiliates. The law provides for a more favorable reinsurance alternative for US companies conducting business in offshore jurisdictions that may be faced with a substantial new tax burden.
"The industry approached us with a need for an onshore alternative," said David Provost, deputy commissioner of Captive Insurance. "It's something we've been considering for some time, but the imposition of BEAT taxes on foreign reinsurance made the timing critical. These companies are akin to a hybrid between captives and traditional insurance. Like captives, they will be limited to reinsurance of affiliates, but they will be regulated in accordance with [National Association of Insurance Commissioners] NAIC accreditation standards like a commercial reinsurer would be."
"In the wake of recent federal tax changes, we quickly identified an opportunity for Vermont as it pertains to offshore reinsurance transactions. Because of Vermont's scale and the close working relationship we have with our state legislature, we were able to capitalize on being the first state to provide this type of reinsurance alternative," said Ian Davis, director of Financial Services.
May 18, 2018