Rob Starr, Big4.com Staff Reporter
Rob Lant, insurance tax partner at KPMG recently commented on the fact that UK insurers’ hopes that they may have been excluded from the Foreign Account Tax Compliance Act (FATCA) regime have been dashed by last week’s release of proposed regulations from the IRS.
“The FATCA challenge will remain a significant and complex one for the insurance industry with many products still within scope, however there are nevertheless reasons to be positive,” he said. “Buried within the 389 pages of draft rules is some good news for insurers which will translate into cost savings for the industry. We estimate the global insurance industry has saved close to $3bn due to the IRS tightening the scope of FATCA and making the proposals more proportionate.”
However there was both good and bad news included in the recent report. The good news, according to Lant came from the fact that UK insurers should be deemed compliant foreign financial institutions (FFIs) if an agreement is reached between the UK and US governments as indicated in their joint statement. Also, writing certain policies will be excluded from triggering FFI status, including property and casualty insurance, regular premium term assurance, personal pensions and PHI products.
“The bottom line is FATCA has not gone away for insurance groups and the focus should now shift to preparing for the commencement of the regime,” Lant said. “Preparing means determining which entities in your group are FFIs and having suitable procedures in place to identify US account holders for policies written on or after 1 July 2013. It also means performing a due diligence exercise on policies in-force over the two year period after the effective date of your FFI agreement, although the graduated requirements (and exclusions) based on the cash values of policies should make this significantly less burdensome.”