By Katie Baker — A new global minimum tax on certain multinational companies will create the potential for double taxation on insurance companies, according to a new report from rating agency, AM Best.

This is given the accounting differences for global insurance companies in different jurisdictions and compared with other industries.

An Organization for Economic Cooperation and Development (OECD) proposal includes a new minimum tax rate of 15% that would apply to companies, including insurers, with revenue above 750 million euros.

In the new report, AM Best states that the application of this new stipulation could be challenging for insurers with longer-duration coverages, as profits may not be realised at the point of sale, unlike other industries.

The use of deferred tax balances by insurers allows for timing differences between accounting regimes.

The insurance industry has appealed this issues to the OECD recommending that such deferred taxes be taken into account when determining the effective tax rate.

Without consideration for this, certain insurers could see double taxation and would not be treated on par with other industries.

The impact will depend on the final nature of the laws passed by respective governments, exemptions that some protective governments may seek to sustain their competitive advantage and accounting interpretations.

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