A provision within the new tax overhaul is emerging as a leading concern for the property and casualty insurance sector. The industry recently experienced growing uncertainties about how a vaguely worded provision within the Base Erosion and Anti-Abuse Tax (BEAT) may affect their bottom line. However, the insurance industry is not the only group that may experience these unintentional ramifications; consumers and small businesses are also likely to see an increase in their premiums due to implications of BEAT.
Consistent with modern financial regulation, United States regulators are increasingly focusing upon individual accountability of corporate officers and directors. Once a regulatory agency contacts a corporation regarding an inquiry into the actions of its agents, it is the duty of the corporation to front the costs of legal defense and representation. Historically, corporate directors and officers liability insurance (“D&O”) covered the costs of legal defense and costs associated with the regulatory investigation. In light of the increasing government emphasis on individual liability within corporations, traditional D&O liability insurance is no longer guaranteed to protect corporate exposure to regulatory inquiry. As a result of these changes to corporate exposure, insurance agencies have begun to create novel insurance solutions to solve the problems created by the new regulatory policy.
Illinois Public Act 100-0538, commonly referred to as House Bill 40, was signed into law on September 28, 2017. The Act repeals provisions in existing Illinois laws that aim to make abortion illegal should there be any change to the federal standard. Additionally, the Act lifts a ban on insurance coverage for abortions for low-income individuals enrolled in Medicaid. While enacting House Bill 40 was a win for advocates of reproductive rights in Illinois, the state will still need to comply with federal anti-abortion laws, such as the Hyde Amendment.
Captive insurance companies, insurance companies owned by persons related to the insureds, have long served as an important risk management tool for businesses as varied as Sears and The New York Times. In recent years, there has been an explosion of “micro-captive” insurance companies, companies with premiums that do not exceed $1.2 million in a year. Until 2017, $1.2 million was the allowable maximum amount of premiums for an insurance company to elect favorable tax treatment under I.R.C. § 831(b), allowing the small insurance company to be taxed only on its investment income. The IRS believes that these “831(b)” micro-captives are often used as tax-shelters rather than for legitimate business purposes.
In 2016, Congress introduced a bill to reform the National Flood Insurance Program. Proponents of the bill saw it as necessary reform to a debt-ridden and ineffective program, while opponents saw it as an attack against a necessary safeguard for coastal Americans. The National Flood Insurance Program was set to expire at the end of September 2016, until Congress extended the program through December 8, 2017. As Americans rebuild from Hurricanes Harvey and Irma, Congress contemplates reform and seeks to keep the program funded past December.