Amid Uncertainty from Regulators, Insurance Industry Can Still Prepare for FATCA Compliance, Says PwC US

NEW YORK, Aug. 30, 2011 /PRNewswire/ -- According to PwC US's Ready, Set, FATCA report, the Foreign Account Tax Compliance Act (FATCA), a government effort to fight tax evasion that requires financial institutions to disclose U.S.-owned accounts to tax authorities or face a 30 percent withholding tax, has broad implications and presents significant challenges for many insurers.

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Awaiting additional guidance from regulators, many insurers have yet to start the process of preparing for FATCA – a process expected to take almost two years to complete. If companies do not plan early enough, they will not be able to modify existing processes to request, collect, review and store required account holder information.  The biggest challenge for almost any institution is understanding how the law specifically impacts their organization.

"Insurers are generally behind other sectors, such as banking and asset management, in understanding what is needed to prepare for the expected changes in front, middle and back office technology and operations, as well as analysis and integration of disparate areas," said Dominick Dell'Imperio, partner, PwC US. "Insurers have to make progress amid uncertainty or else face a potentially insurmountable hurdle down the road."

Chris Joline, director, PwC US financial services advisory, added, "While working with those in the insurance industry who are trying to evaluate the impact of FATCA on their organization, we have uncovered many of the complexities and other unique challenges that were not expected, including how to treat closed blocks of business, how domestic insurers will better understand the ownership of non-natural holders, and many other product-specific issues.  Given the uniqueness of each insurer's business structure, evaluating the impact of FATCA on all segments of their business is critical. "

While the IRS and U.S. Department of Treasury are expected to release additional guidance later this year, insurers can take the following steps today to ensure they meet the January 1, 2013 compliance date:

1. Current State Analysis: Assess the current state of the organization and determine what processes and technology can be leveraged or modified to meet compliance.

2. Future State and Roadmap Development: Develop a target operating model and preliminary implementation road map.

3. Implementation: Execute on steps that can be taken now and educate customers and affected business units about the new data collection and reporting requirements.

Click here to download: Ready, set, FATCA.

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SOURCE PwC