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IPS for Non-Life (tax constraint)
The CFAI references tax considerations being extremely important due to the nature of the underwriting cycle for non-life (casualty) companies, ie periods where NOL's (losses) are available to offset earnings, less tax exempt instruments are required, but for periods with earnings and no NOLS, more tax exempt securities are necessary.
However later in the reading it goes on to say in 1986 new tax legislation was adopted essentially eliminating tax benefits of tax exempt securities for non-life insurance companies, therefore making this consideration less of an issue. CFAI then goes on to give some half assed explanation about how advanced modeling is needed to determine appropriate after tax allocation "but it's beyond the scope of the reading" - it is unclear whether tax exempt securities that were owned prior to the legislative change remain tax exempt (doesn't make sense but could be), or if the rule was applied retrospectively as well (more likely i would think).
Then, in their usual fashion, they go on to list tax an "extremely important" consideration in the IPS construction, due to reasons listed above in the first paragraph.
So wtf is the deal here, is it, or is it not, a consideration? |
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发表于 2011-7-13 17:23
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