United States

Current Perspectives in Insurance Tax (video)

January 26, 2015 | Craig Pichette--partner and Insurance Tax sector leader--leads a discussion among a number of senior Insurance Tax professionals in a discussion of challenges facing the industry. These challenges include a rapidly evolving regulatory environment; the opportunities associated with transforming tax organizations; finding and developing talent; the threat and potential of significant tax reform; and increasing demands of financial reporting.


Craig Pichette: The insurance tax industry faces a number of significant challenges. These challenges include:

  • A rapidly evolving regulatory environment
  • Do more, faster, and better
  • A struggle to find and develop talent
  • The potential of significant tax reform and the threat that poses to our industry, and
  • The ever increasing demands with respect to financial reporting.

As the leader of KPMG’s Insurance Tax practice in the U.S., I have been working with our team to help our clients work proactively to address these issues. One of the still evolving business challenges affecting our clients is the shifting regulatory environment arising from the last economic downturn and the governmental response to it. Kim Sellers leads our Insurance Tax practice in New York and has been working with many of our largest clients in addressing these challenges.

Kim Sellers: The regulatory environment is changing quickly, both globally and domestically. Basel III, Solvency II, and the designation of large global insurance groups as SIFIs are requiring insurers to maintain more capital and comply with increased reporting and compliance costs. Companies are restructuring their operations to efficiently manage their capital position. This restructurings have significant tax consequences. Tax departments and their advisers have a critical role to play in effectively managing these reorganizations. For instance, we have assisted a number of large U.S. companies in redomiciling their offshore reinsurance vehicles into domestic jurisdictions.

Pichette: One of the consistent themes we hear in discussions with chief tax officers is the need to be more efficient, to do more, faster, cheaper, and better. Troy McGill is in our Chicago office and works with insurance companies on their tax transformation initiatives.

Troy McGill: Expense pressure and the increasing expectations for perfection in executing financial reporting and compliance functions has led insurance company tax departments to reevaluate their people, processes, and technology. Many companies have implemented or are implementing technology solutions to improve their control environments, shorten close cycles, and improve their reporting. External factors are continually raising their expectations in these areas. But it’s not just about technology. As we talk to clients, they are coming to realize that a technology solution often represents just a better typewriter if it’s not accompanied by improvements in the management of data and a coherent plan to integrate the various reporting processes into a single source of truth. We have been working with a number of insurance company tax departments to improve their data, processes, and technology to meet the increasing performance expectations of the users of their product.

Pichette: Against this backdrop of increased expectations, the entire tax industry is challenged in finding the talent to effectively meet the business requirements of their organizations. John Cassil joined our firm in New York in 2014 after having been the tax director of an insurance company for almost twenty years. He has been working with Troy in the tax transformation space as well as championing our efforts to work with tax departments to address the talent challenge.

John Cassil: Perhaps the most significant challenges chief tax officers face are attracting, developing, and retaining talent. At the same time the tax industry has been challenged in attracting tax talent, but performance expectations have increased. One of the trends we see is an increased interest amongst our clients in outsourcing or cosourcing compliance functions to address these challenges. The benefits are a reliable and consistent source of talent and an ability to focus their internal talent on adding value to the organization.

Pichette: The impact of government action on the industry isn’t limited to the regulatory world. Governments are actively considering changes to some of the most fundamental rule sets that govern how large, multinational taxpayers, including insurance companies, are taxed globally. The OECD, through its base erosion and profit shifting (or BEPS) initiative, has been actively pursuing global tax reform, including changes to transfer pricing rules and the definition of a permanent establishment--what level of economic activity is sufficient to allow a country to tax activity within their jurisdiction. This has the potential to fundamentally shift the tax rules that insurance companies have built their legal entities and business processes around. Changes to these rules could increase the tax burden on the industry and require changes to ways that our international clients do business. We have a group of dedicated transfer pricing and international tax professionals ready to assist our clients in addressing these challenges.

In addition, in the U.S., the prospect of domestic tax reform is of great concern to the insurance industry. Sheryl Flum recently joined our firm in our Washington National Tax practice after serving as the senior specialist within the IRS for insurance tax matters, serving as the branch chief for insurance within the IRS Office of Chief Counsel.

Sheryl Flum: The prospect of U.S. tax reform is both a challenge and a threat to the insurance industry. In recent tax reform proposals, it is clear that the industry is being targeted. Our Washington National Tax practice works with our clients to help them understand the potential impact of various tax reform proposals on their tax burden, their statutory capital, and on their customers. While reform may not be imminent, it is critical to understand the potential consequences of these changes.

Pichette: Many people think that filing income tax returns is the most important task of an insurance company tax department. The reality is that financial reporting is viewed as the most important function by most companies. Teresa Fitzgerald leads our Insurance Income Tax Financial Reporting practice.

Teresa Fitzgerald: The Sarbanes-Oxley reforms and the formation of the PCAOB following the economic crisis have led to increasing expectations relating to income tax provisions and financial reporting. We work with our clients to improve their technology, processes, and talent to enhance their tax reporting function. Areas that are particularly challenging to insurance companies are reporting under multiple bases of accounting, including their statutory, GAAP and IFRS tax provisions, purchase accounting, and reporting and modelling to comply with increasing regulatory reporting requirements.

Pichette: In the 27 years I’ve been working in KPMG’s Insurance Tax practice, I can’t remember a time that has been more challenging to our clients. We’ve assembled a great team of insurance tax professionals across the country who are dedicated to helping our clients proactively address these challenges. We appreciate the deep relationships we have with our friends across the industry. We are committed to staying at the forefront of these challenges and bringing cutting-edge thought leadership to our clients as they address these issues.



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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.