The main risk of Section 899 of the US Tax Bill for European insurers and reinsurers relates to a tax on dividends from their US subsidiaries, however, the impact on earnings is expected to be relatively manageable, according to Berenberg.
Section 899 of the US Tax Bill, passed by Congress on 22nd May, 2025, would allow the US to tax dividends paid by US subsidiaries to their parent companies, with the tax rising in steps of 5% from 2026 to ultimately reach 20% in 2029.
To impose the tax, the country of tax residence must be designated as having unfair taxes. There are three tests to confirm this: the undertaxed profits rule (UTPR), digital services taxes (DSTs), and diverted profits taxes (DPTs).
Berenberg noted that Switzerland does not impose any of these taxes and has no current plans to implement them. Therefore, Switzerland-based Swiss Re and Zurich would not face this potential extra US tax.
Berenberg estimates that Aegon could face the highest tax impact—around 11%—based on operating capital generation, which it uses as a proxy for earnings since it is Aegon’s main earnings metric.
Using net profit as a basis for the other companies, Berenberg estimates the next most affected would be Allianz at 4.5%, AXA at 3.5%, Hannover Re at 3.3%, Talanx at 2.4%, SCOR at 1.3%, and Munich Re at just 1.2%. If Switzerland were to be classified as having an unfair tax environment, Zurich could face an impact of around 9% and Swiss Re about 4%.
Berenberg believes reinsurers have the greatest flexibility to restructure operations and mitigate the risk of additional taxation. For example, Munich Re could potentially reallocate its US reinsurance treaties to Munich Re AG in Munich, which serves as both the group’s holding company and its main reinsurance unit.
Berenberg also noted there has been limited impact on share prices so far, stating, “We have compared the change in share prices of the insurers in our list between 21 May, which is the day before the US Tax Bill was passed by Congress, to 9 June, with our estimates of the potential tax impact. There appears to be little correlation between the change in share prices and our estimates, which in our view means investors believe much of the potential risk can be mitigated through management actions.”
Berenberg concluded that while Section 899 presents a potential risk to earnings, the impact is either relatively manageable or can be significantly mitigated through management actions.
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