UK’s insurance sector breathed a sigh of relief as it acknowledged the withdrawal of Section 899 from the United States’ reconciliation bill.
Section 899 was a proposed provision that would have substantially increased the tax burden on certain foreign companies operating in the US. The measure could have raised the effective tax rate on profits and dividends for UK-based firms to approximately 41%, creating potential barriers for continued international investment.
Lloyd’s chair Sir Charles Roxburgh has acknowledged the removal of Section 899 from the reconciliation bill, following confirmation from the US Treasury and Congress. The change comes after engagement involving the UK Chancellor and finance ministers from other G7 nations.
“This greatly supports not only Lloyd’s business in the United States but all British companies with interests in the United States and will enable international investment in the United States to serve domestic businesses and communities,” Roxburgh said.
“Lloyd’s has been providing insurance capacity to support the economy of the United States - our largest market - for over a century, and we are pleased to continue to do so,” he added.
The withdrawal of Section 899 followed a G7-level agreement with US authorities, under which a “side-by-side” tax framework will be implemented. This allows American tax rules to coexist with the global minimum tax standards agreed by G7 countries.
The compromise was seen as necessary to avoid penalising international businesses through overlapping tax requirements while preserving the integrity of the US tax base.
Legal clarity in the US surplus lines market remains important for foreign insurers such as Lloyd’s. In a recent federal case, the US Second Circuit Court of Appeals upheld the enforceability of arbitration clauses within surplus lines policies, even in states like Louisiana where such clauses are generally restricted by insurance law.
Section 899 had also raised concern among industry stakeholders due to its potential to deter cross-border capital flows. With the section now removed, Lloyd’s and other foreign firms avoid what would have been a significant increase in tax exposure.
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