| May 14, 2008
The Catastrophe Reserve (C) Working Group of the Property and Casualty Insurance (C) Committee requests written comments from NAIC members and interested parties on the following proposition:
Background: Current tax laws and accounting principles discourage U.S. property and casualty insurers from accumulating assets specifically to pay for future catastrophe losses. Instead, payments for catastrophe losses are made from unrestricted policyholder surplus after the losses are incurred. Current U.S. tax law does not permit deduction of reserves for future catastrophe losses. In 1997 and again in 2001, the NAIC developed a Tax-Deferred Pre-Event Catastrophe Reserve Proposal, but, at the time, agreed with interested parties that it would not pursue the proposal unless Congress acted to amend the IRS Tax Code to permit insurers to accumulate assets specifically to pay for future catastrophe losses on a tax-deferred basis.
Request for Comments: Should the NAIC reconsider its decision to defer action to implement the Tax-Deferred Pre-Event Catastrophe Reserve until Congress has acted to amend the IRS Tax Code? Is there a benefit to the public of requiring insurers to set aside some assets that are dedicated to future catastrophe losses even if they are after-tax assets?
The deadline for receipt of written comments is close of business on June 27, 2008. Written comments should be sent electronically to Pam Simpson (psimpson@naic.org). The NAIC prefers that written comments be in either Microsoft Word format or in PDF format. All written comments received by the deadline will be posted on the NAIC web site under Committees and Activities for the Catastrophe Reserve (C) Working Group. Comments will be considered by the Working Group in a conference call to be scheduled in July 2008.
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