"non-taxable income vs taxable income"

lovehuayulovehuayu
in Klann.ReinsComm

I saw "The reinsurer's balance sheet shift is from non-taxable income to taxable income, so for the reinsurer, it isn't really a tax benefit." I might missed the information on non-taxable and taxable income. Could you please explain what are included for non-taxable income?

Comments

  • Staff - ACStaff - AC

    In this instance, "taxable" and "non-taxable" do not refer to different kinds of income. Rather, Graham is using this convention to express the direction of the impact of commutation on taxes. Primary ends up with less taxable income, because it assumed back liability, which reduces its income. Reinsurer ends up with more taxable income because it ceded back the liability, which increases its income.

  • lovehuayulovehuayu

    Thanks. I understood now. In SAAP-62R it mentioned "Reinsurance Acct allows losses to flow through income, so taxable income is reduced". Then I could understand the income is reduced, and ignore that "taxable", right?

  • Staff - ACStaff - AC

    In essence, you can. But don't forget that that statement is in relation to tax benefits to the filer.

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