One Actuary's Opinion of Federal Tax Strategy

Article Abstract:

The possibility of federal taxation based on discounting loss reserves carries significant problems for the property casualty industry. A major trend in the industry is to use investment income to offset underwriting losses in order to show an operating profit. Thus a profit that does not actually exist could become subject to federal taxation. After an examination of the practical considerations the concept of discounting becomes unacceptable. Other areas to be considered include reinsurance implications, the public image of the industry and disadvantages of stock insurers. Two factors could lead to federal regulation replacing state regulation: first, the lack of uniformity in state regulation and second, the deregulation of financial institutions. The property casualty industry could be a factor in whether or not state regulators survive financial services deregulation. Federal taxation of loss reserves may be one step in the move to federal regulation of the industry.

Taxation, Laws, regulations and rules, National government, Federal government, Reserves (Accounting)

---

Solvency and the Dogpatch Ham

Article Abstract:

Richard Stewart and Barbara Stewart of Stewart Economics offer their opinion on the changes and cycles characteristic of the insurance industry through a question and answer format. The growth of investment income will increase in importance as the nature of the industry becomes more and more financial. Responsible investment strategies improve cash flow which in turn can allow underwriting practices to be tightened, improving competition. Effective management is important in analyzing captive companies. Insolvencies are becoming more characteristic of bad management rather than poor investment strategy. Regulators need to be prepared for restructuring within the industry due to changes in the financial services area and company mergers and consolidations.

Analysis, Economic policy

---

Too Much of a Good Thing

Article Abstract:

Excess capacity is evident in the property casualty industry due to slow premium growth and increased surplus. The surplus increase is attributed to high interest rates and high investment income. Excess capacity could turn into loss reserves. Rate competition is an unfavorable effect of excess capacity. Insurers have a number of methods available to them to reduce excess capacity. The competitive situation is expected to get worse but business growth could relieve the problems of excess capacity.

Competition (Economics), Prices and rates, Growth, Supply and demand

Similar abstracts:

• Abstracts: An Intermediary's View of the Reinsurance Market. Captives as a comp cure. Reinsurance at the Crossroads
• Abstracts: 1983 Insurance Stock Trends. IRS Catch that Mole
• Abstracts: Clearing up a murky tax issue. The How and Why of Bank Entry

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.