The Insurance Excise Tax and Competition for U.S. Reinsurance Premiums
GGD-89-115BR, Sep 25, 1989
Pursuant to a congressional request, GAO examined the effects of the Tax Reform Act of 1986 on competition between U.S. and foreign property and casualty reinsurers in the U.S. market.
GAO found that: (1) available data were inconclusive regarding the act's effects on the competitiveness of U.S. reinsurers in the domestic market; (2) the foreign share of the U.S. reinsurance market rose from 26.1 percent in 1986 to 32.6 percent in 1987; (3) a U.S. reinsurance association believed that the act created disparities in the tax treatment of U.S. and foreign reinsurers; (4) the association advanced a proposal that would increase the excise tax on premiums that go to foreign reinsurers that cover U.S. risks and eliminate tax treaty provisions that waive the excise tax; (5) the act may have increased the tax burden on U.S. reinsurers, but foreign reinsurers may have similar tax burdens in their own countries; and (6) an increase in the excise tax and elimination of excise tax treaty waivers could encourage foreign countermeasures.