A lower U.S. corporate tax rate would not upend the competitive landscape for property and casualty insurers, XL Group Ltd CEO Michael McGavick said during an earnings call.
Several major insurers and reinsurers in the space, including XL, operate in Bermuda and other offshore domiciles. They face a much lower U.S. tax rate by doing so, and some domestic insurers have seen the possibility of a lower U.S. corporate tax rate as a chance to level the playing field between them and their offshore competitors in terms of taxes. Tax reform could also include a revision to the way offshore insurers are treated by the tax code, potentially leading them to pay much more.
The day before McGavick's comments, executives from W. R. Berkley Corp. told shareholders and analysts during their own earnings call that a lower U.S. tax rate, combined with a revised policy that raises the tax burden for offshore competitors, could be a "double positive" for the company's shareholders. McGavick downplayed this interpretation.
"The idea that [tax] reform's going to be a huge competitive disruption, I really think that idea is nonsense," he said. Differences in tax treatment are "not how we compete, and that's not how we win business," he added.
"The companies with whom we are mostly competing are global, not U.S. domestics," he continued. "I don't see that changing very much. Overall, we're comfortable with the way we approach tax; we're comfortable with our competitive position ... no matter what comes."
XL Group supports lower taxes in the U.S. and any measure that improves economic growth in the country, he said, adding that the company does pay some U.S. taxes and would benefit in that way from a lower rate.