The Effect of accounting for income tax uncertainty on tax-deductible loss accruals for private insurers

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      <subfield code="a">The Effect of accounting for income tax uncertainty on tax-deductible loss accruals for private insurers</subfield>
      <subfield code="c">Jiang Cheng...[et.al.]</subfield>
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      <subfield code="a">Little is known about the effects of accounting regulation on private insurers. In this paper, we examine the uniqueness of the tax deductibility of insurers' loss accruals. We find that private insurers' overstatement of loss accruals in tax planning significantly decreases after adoption of the Statement of Statutory Accounting Principles (SSAP) 101, which mandates that insurance companies recognize and measure tax contingencies. Relative to public insurers' loss reserve errors, those of private insurers decrease by an estimated 0.8%1.1% of total assets, implying a forfeited tax benefit of $1.79$4.4 million per firm, per year. We also find that the decrease is mitigated for insurers with lower IRS monitoring or in states where the insurance industry comprises a greater part of state employment. Additionally, insurers with independent boards, or those with independent, external actuaries are more responsive to the adoption of SSAP 101.

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      <subfield code="g">09/05/2022 Volumen 89 Número 2 - mayo 2022 , p. 505-544</subfield>
      <subfield code="x">0022-4367</subfield>
      <subfield code="t">The Journal of risk and insurance</subfield>
      <subfield code="d">Nueva York : The American Risk and Insurance Association, 1964-</subfield>
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