EC to restrict deferred tax assets in Solvency II

Rules expected to be tightened on determination of future profits

European policy-makers are planning to constrain insurers' ability to recognise deferred tax assets (DTA) as loss-absorbing capital on their Solvency II balance sheets.

A change in the wording of the delegated acts being developed by the European Commission is expected to tighten the rules on how future profits should be determined by insurers when looking to use them to take credit for DTA.

DTA are accumulated when an insurer expects to pay less tax in future because of a taxable temporary