The Foreign Account Tax Compliance Act (FATCA) is a U.S. federal law that affects virtually the entire financial services sector, including the insurance industry. FATCA is intended primarily as an information-gathering law and requires foreign financial institutions (including many non-U.S. insurance companies and non-U.S. insurance brokers) to provide information to the IRS about their U.S. account owners (in the case of reinsurance transactions, the U.S. insurers). FATCA requires certain U.S. insurance companies and U.S. insurance brokers to withhold 30% of the gross amount of such premiums when they are paid to non-compliant foreign financial institutions.
Many insurance companies do business with foreign-based reinsurers through a U.S. based broker in which case the ultimate compliance falls on the U.S. broker. However, we do recommend insurance companies have a conversation with the broker(s) and ask them if they are ensuring FATCA compliance for the foreign-based insurers that are participants on the company’s reinsurance treaties. If a U.S. insurance company does business directly with a foreign-based reinsurer, the compliance requirements fall directly on the U.S. insurance company.
Our Property & Casualty (P&C) Insurance Group is available if you have any questions or concerns about this industry update. As an A.M. Best Ranked practice, the BSSF P&C Insurance Group is one of the largest in the Mid-Atlantic region to service the industry.
ABOUT THE AUTHOR
Scott A. Esworthy, CPA
Scott is a Principal with BSSF, specializing in the audits of property and casualty insurance entities (P&C) and employee benefit plans. His expertise in these areas extends beyond the Central PA region. Scott and his team serve clients in the Mid-Atlantic Region, with a focus in Pennsylvania, New Jersey, Maryland, Delaware, Virginia, Ohio, and New York.