An increasing tax burden is threatening growth prospects for insurers, according to PwC’s insurance chief executive officer (CEO) survey.
The survey, which consisted of 80 insurance CEOs in 37 countries, reported that 64 percent of CEOs were worried about the increasing tax burden. Two years ago, only 57 percent saw the tax burden as a threat to growth prospects.
A recent report by PwC highlights the impact regulatory developments are having on insurers’ operations. It explained that tax functions within insurance companies may find it difficult to cope with the challenges of adapting and having the agility required to deal with the constant change in the tax environment.
This is in addition to complimenting the way insurance is changing towards real-time pricing and customer-focused solutions, said PwC.
“The heightened reputational and non-compliance risks associated with how companies manage their tax affairs means that boards are taking a much closer and more active interest in tax policies and how the tax landscape is set to evolve,” said the report. “Executives increasingly expect tax teams to keep them up-to-date with tax policy developments, strategic options and potential risks.”
But just one third of tax directors have formulated a plan to adapt their resources to address the future shape of tax functions, while 80 percent of tax directors acknowledging that their information systems require enhancement.
Colin Graham, global insurance tax leader at PwC, said: “Tax has always been one of an insurer’s most significant expenses, and a key challenge for insurers now is to continue to find growth whilst responding in a clear and thoughtful way to a much wider base of stakeholders than before, including not only tax authorities and governments, but also regulators, investors, non-governmental organisations (NGOs), the media and the general public.”
He added: “The certainties and demands that have shaped tax management over the past 30 years are being swept aside. What tax teams are required to do, how they do it, who does it and where they do it will all change as a result.
“As companies focus on maximising return on equity and managing capital under new solvency regimes, the value that can be created by tax professionals is becoming increasingly recognised and highly prized. Insurers need to ensure their tax functions are reviewed and automated in order to allow tax teams to become closer to transactional activity and strategic conversations.”
PwC, Tax, Bermuda, Europe, North America, Regulation, Colin Graham